The Impact of ESG Ratings on Corporate Valuation: A Case Study of Kweichow Moutai

Abstract

In today's rapidly evolving society, there is a growing emphasis on high-quality corporate development. Consequently, even a relatively traditional issue—corporate valuation—must keep pace with the times by incorporating high-quality development into its assessment framework. This necessitates introducing a new metric to reflect the proportion of a company's investment in high-quality development. Therefore, this paper proposes adjusting corporate valuations by referencing ESG ratings. Taking Kweichow Moutai as a case study, this paper examines the impact of environmental, social, and governance factors within ESG on corporate valuation. Among valuation models, the cost approach, market approach, and income approach are compared, with the income approach identified as the most suitable for Moutai. In practical adjustments to the general income approach model (DCF model), ESG metrics are incorporated to more accurately reflect Moutai's long-term corporate value. Finally, the paper reflects on the model development process and identifies limitations in experimental methodologies. This study better highlights how ESG factors contribute to a company's sustainable growth from a long-term perspective. By integrating these factors into valuation, it encourages greater societal emphasis on corporate ESG performance.