Integrating ESG Factors into the Business Valuation: Mathematical Model Development and Underlying Assumption Framework

Objective knowledge is constructed at a universal level, grounded in fundamental philosophical principles, and its core concepts must be acknowledged and function across all dimensions of measurement. In today’s world, one of the most transformative revolutions emerging within business and investment environment is the ESG revolution-referring to Environmental, Social, and Governance. However, there remains no universally accepted knowledge framework, mathematical valuation model, or foundational philosophical concept that systematically integrates ESG factors into the estimation of a company’s intrinsic value. The researcher developed next-generation mathematical valuation models to address the integration of ESG factors and tested them in real-world applications. Experiments were conducted on five major public companies with the efficient market hypothesis. Intrinsic share values were estimated across three historical periods and compared with corresponding market prices. Results indicate that the proposed models achieved higher predictive accuracy than conventional valuation models.