ESG does not create “moral values”; creates measurable economic value | ESG

The systematic integration of these factors modifies the traditional logic of business evaluation: risk, return, cost of capital and predictability of future flows. This is a structural change, intensified by regulatory advances. The convergence of the CVM with international disclosure standards moves ESG from a discursive to a measurable domain.

In 2023, the IInternational Sustainability Standards Board (ISSB)linked to IFRS Foundationhas published two standards that make this movement more concrete: IFRS S1, which defines the general requirements for sustainable development reporting from a financial point of view, and IFRS S2, intended specifically for climate risks. From 2026, Brazilian public companies will have to disclose this information in accordance with new standards, which consolidate the link between sustainability and future financial performance.

This new regulatory step changes the way companies, investors and analysts approach the economic transition. By standardizing measurements and defining what must be reported, international standards reduce information asymmetries and make socio-environmental risks comparable across sectors and regions. SO, balance sheets now more clearly reflect the costs and benefits of the transition, enable the market to differentiate between companies that only communicate sustainability objectives and those that in fact reduce their exposure to risks and improve their competitiveness.

This integration requires translate socio-environmental impacts into assets, liabilities and provisions. Among assets, investments in low-carbon technologies and infrastructure, water reuse systems, traceability solutions and internal renewable energy are gaining weight – all recorded as fixed assets, with a defined depreciation and useful life. This group also includes intangible assets related to innovation, such as eco-efficiency patents and proprietary governance systems.

On the liability side, there are regulatory obligations for environmental remediation, labor contingencies resulting from inadequate practices, and costs associated with climate transition risk, such as future purchases of carbon credits or adjustments to likely standards.

Differences between sectors reinforce the need for specific strategies. High-emission companies, such as those in the energy and mining sector, must prioritize the environmental pillar to enable investments in decarbonization. Labor-intensive sectors, such as retail and food, tend to experience more pressure on the social pillar, particularly in supplier relationships. Heavily regulated sectors, such as finance and telecommunications, focus their competitiveness on strengthening governance.

This translation of socio-environmental impacts because the balance sheet also directly affects the cost of capital. Companies exposed to environmental risks experience greater regulatory and operational volatility, increasing their cost of equity. On the other hand, companies with strong governance and consistent transparency reduce uncertainty and attract institutional investors. The trend is similar when it comes to the cost of debt: instruments such as green bonds and financing linked to the Sustainable Development Goals offer more competitive rates for companies with credible and verifiable commitments.

In the end, the ESG functions as a risk pricing mechanism. This alone does not create value, but changes the discount rate and understanding of future cash generation capacity. The projections are also changing: they now include revenues from new markets, such as carbon credits, sustainable products and services based on circularity, in addition to cost reductions brought by energy efficiency, less use of natural resources and more streamlined supply chains.

The transformation of consumer behavior, particularly among younger people, is strengthening this movement. Demand becomes more sensitive to sustainability, which affects price elasticity and market share.

When measurably integrated into the balance sheet, ESG ceases to be rhetoric and becomes part of the economic equation that defines value. This is what reconfigures business pricing: not through abstract principles, but through indicators that shape risks, opportunities and competitiveness.

Sergio Volk is a member of the Tax Council of the Brazilian Institute of Financial Directors of São Paulo (IBEF-SP). He is an economist, holds a doctorate in economics from EPGE-FGV/RJ and a master’s degree in Accounting, Finance and Auditing from PUC-SP. He was president of IBEF Espírito Santo, Paraná and Araraquara, member of the advisory board of Cogni ESG and Planning Corporate Finance & Advisory, as well as professor at FAAP. He teaches postgraduate courses at FEI and is the author of several works.