A responsible approach to investments constitute an integral part of the investment decision-making process at PriorNilsson. The portfolio managers are treating company, sector and country ESG data in the financial analysis in the same way as and alongside other publically available data on the firm. This ESG data is sourced from the media, external reports, annual reports, CSR reports, equity research reports or any publically accessible source of information.
Practically, ESG factors are integrated into the investment decision-making process by e.g., evaluating the risks and opportunities of the investment based on trends. This could be listed equities' business risks associated with the shift from fossil fuels. Such trends might lead to new legislation that affects a company’s future earnings, need for new investments and re-structuring costs.
In essence, ESG factors might affect income statements and balance sheets as well as cashflows in the listed equity firm. This sort of fundamental value analysis is a natural part of all our analyses of listed equity and we choose this approach because we believe that ESG factors have an impact on a firm's intrinsic value. If, for example, we think that the risk of higher taxes or sanctions/prohibitions of a certain business, then the cashflows from this firm should be discounted with a higher discount rate to reflect this increase in risk, thus lowering the intrinsic value of the business.