Integrating ESG into Corporate Valuation: A Case Study of Yangtze Power’s Modified DCF Approach

Research Article
Open access

Integrating ESG into Corporate Valuation: A Case Study of Yangtze Power’s Modified DCF Approach

Yan Xie 1*
  • 1 Shandong University of Science and Technology    
  • *corresponding author xieyanxy2025@163.com
AEMPS Vol.186
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-153-2
ISBN (Online): 978-1-80590-154-9

Abstract

Against the backdrop of the global transition to a low-carbon economy, corporate valuation must incorporate ESG factors. The traditional DCF model is insufficient to fully capture enterprises' sustainable development performance. In the context of China's emerging capital market, incorporating ESG factors into the China-specific valuation frameworks can help accurately assess long-term corporate value, guide capital flows towards high-quality enterprises, and promote high-quality economic growth. This study refines the DCF model by adjusting growth rates and discount rates to reflect ESG considerations. Through empirical data analysis and comparative study, this paper revalued Yangtze Power using the modified DCF model. Results showed that the modified DCF model produced valuations more aligned with the company's actual stock price, demonstrating that ESG-integrated DCF models can more accurately reflect true corporate value. This study provides new perspectives and methods for improving traditional corporate valuation approaches.

Keywords:

ESG Integration, DCF Model, Corporate Valuation, Sustainable Finance, Yangtze Power

Xie,Y. (2025). Integrating ESG into Corporate Valuation: A Case Study of Yangtze Power’s Modified DCF Approach. Advances in Economics, Management and Political Sciences,186,9-16.
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References

[1]. iangcai Securities Research Group, Gao, Z., & Xu, W. (2024). Optimizing the valuation system for Chinese state-owned enterprises. Securities Market Herald, 10(10), 3–14.

[2]. Gregory, R. P., Stead, J. G., & Stead, E. (2021). The global pricing of environmental, social, and governance (ESG) criteria. Journal of Sustainable Finance & Investment, 11(4), 310-329.

[3]. Qiu, M., & Yin, H. (2019). Corporate ESG performance and financing costs under the context of ecological civilization construction. Journal of Quantitative & Technical Economics, 36(3), 108–123.

[4]. Tong, F., & Wang, Y. J. (2022). Can ESG performance enhance corporate value? An empirical study based on China’s A-share listed companies. Commercial Accounting, (21), 48–53.

[5]. Shi, Y., & Wang, H. (2023). Corporate social responsibility and corporate value: From the perspective of ESG risk premium. Economic Research Journal, 58(6), 67–83.

[6]. Yang, H. (2022). A case study on enterprise value assessment based on ESG ratings. Doctoral Dissertation, Central University of Finance and Economics. DOI:10.27665/d.cnki.gzcju.2022.000451.

[7]. Schanzenbach, M., & Sitkoff, R H. (2020). Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee. Stanford Law Review, 72.

[8]. Parashar, M., Jaiswal. R, Sharma, M. (2024). An empirical analysis of ESG and financial performance of clean energy companies through unsupervised machine learning. Procedia Computer Science, 241330-337.

Cite this article

Xie,Y. (2025). Integrating ESG into Corporate Valuation: A Case Study of Yangtze Power’s Modified DCF Approach. Advances in Economics, Management and Political Sciences,186,9-16.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of ICMRED 2025 Symposium: Effective Communication as a Powerful Management Tool

ISBN：978-1-80590-153-2(Print) / 978-1-80590-154-9(Online)
Editor：Lukáš Vartiak
Conference website: https://2025.icmred.org/Bratislava.html
Conference date: 30 May 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.186
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. iangcai Securities Research Group, Gao, Z., & Xu, W. (2024). Optimizing the valuation system for Chinese state-owned enterprises. Securities Market Herald, 10(10), 3–14.

[2]. Gregory, R. P., Stead, J. G., & Stead, E. (2021). The global pricing of environmental, social, and governance (ESG) criteria. Journal of Sustainable Finance & Investment, 11(4), 310-329.

[3]. Qiu, M., & Yin, H. (2019). Corporate ESG performance and financing costs under the context of ecological civilization construction. Journal of Quantitative & Technical Economics, 36(3), 108–123.

[4]. Tong, F., & Wang, Y. J. (2022). Can ESG performance enhance corporate value? An empirical study based on China’s A-share listed companies. Commercial Accounting, (21), 48–53.

[5]. Shi, Y., & Wang, H. (2023). Corporate social responsibility and corporate value: From the perspective of ESG risk premium. Economic Research Journal, 58(6), 67–83.

[6]. Yang, H. (2022). A case study on enterprise value assessment based on ESG ratings. Doctoral Dissertation, Central University of Finance and Economics. DOI:10.27665/d.cnki.gzcju.2022.000451.

[7]. Schanzenbach, M., & Sitkoff, R H. (2020). Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee. Stanford Law Review, 72.

[8]. Parashar, M., Jaiswal. R, Sharma, M. (2024). An empirical analysis of ESG and financial performance of clean energy companies through unsupervised machine learning. Procedia Computer Science, 241330-337.

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