Overview of ESG 100 in 2020

Overview of ESG 100 in 2020

For the third year running The Governance Group has assessed the sustainability reporting of the 100 largest companies listed on the Oslo Stock Exchange. On 8th September, The Governance Group published its annual analysis of ESG reporting – ESG 100 – rating the 100 largest companies on the Oslo Stock Exchange. Sustainability and ESG factors have long been perceived as a minor concern for investors. Many CEOs live by the assumption that a sustainability agenda conflicts with shareholder interests and that ESG consideration are immaterial to finance. It has become increasingly clear that this notion is outdated.

In this analysis, Scatec Solar was rated A, placing the company in the top category among companies excelling at ESG reporting. The analysis rates how well companies disclose relevant data. The analysis is a useful tool for corporations and investors alike to better understand the risks and opportunities related to ESG. The financial markets’ quest for ESG information has radically changed communication with investors on sustainability. For analysts to correctly evaluate a company there is a need for more information on ESG performance and the company’s governance approach for managing sustainability risks and opportunities. Therefore, TGT performed the mind depth ESG analysis and rated ESG 100 sustainability companies. 

Assessment criteria

The companies were analysed over four relevant areas. The Global Reporting Initiative – GRI, by assessing the degree to which the company reports to material topics in a systematic manner. Those do not include only impacts that have intermediate consequences from a business perspective, such as financial costs or a damaged reputation. The assessment also includes CDP rating, A to D, or F if they failed to report. Moreover, companies were also assessed as to whether their reporting complies with the recommendations of the TCFD with regard to governance, strategy, risk management and goal setting. Integration of UN Sustainable Development Goals has gained widespread international support, including from business.

Scatec Solar is an integrated independent solar power producer, delivering affordable, rapidly deployable and sustainable clean energy worldwide. While contributing to reducing emission is at the core of Scatec Solar’s business model, sustainability is also integrated into all operations and is closely monitored and reported. 

Key takeaway

This year’s analysis of the 100 largest companies on the Oslo Stock Exchange reveals that many companies lack a systematic approach to sustainability reporting. However, the trend is positive compared to last year. This is good news for investors and society at large – sustainability has become less noise and more substance.

The responsibility of identifying material sustainability risks and associated goals does not only belong to senior management. The company’s board should have access to information regarding key sustainability risks to the same extent as it does in other areas. By being transparent with regard to risk tolerance and goals related to material sustainability factors, the board will also aid investors in understanding the company. 

Read the full Stock Exchange report on The Governance Group. The analysis is a useful tool for corporations and investors alike to better understand the risks and opportunities related to ESG.


Grieg Seafood3,0-3,9
Norsk Hydro3,0-3,9
SpareBank 13,0-3,9
Yara International3,0-3,9
Aker BP2,0-2,9
Lerøy Seafood Group2,0-2,9
Nordic Semiconductor2,0-2,9
Petroleum Geo-Services2,0-2,9
Scatec Solar2,0-2,9
Wallenius Wilhelmsen2,0-2,9
AF Gruppen1,0-1,9
Aker Solutions1,0-1,9
AKVA Group1,0-1,9
BW LPG1,0-1,9
BW Offshore Limited1,0-1,9
Golden Ocean Group1,0-1,9
Höegh LNG Holdings1,0-1,9
Kongsberg Automotive1,0-1,9
Kongsberg Gruppen1,0-1,9
Norway Royal Salmon1,0-1,9
Norwegian Property1,0-1,9
NRC Group1,0-1,9
RAK Petroleum1,0-1,9
Salmones Camanchaca1,0-1,9
SpareBank 1 Nord-Norge1,0-1,9
SpareBank 1 SMN1,0-1,9
SpareBank 1 SR-Bank1,0-1,9
Subsea 71,0-1,9
Tomra Systems1,0-1,9
Wilh. Wilhelmsen Holding1,0-1,9
ABG Sundal Collier0,0-0,9
American Shipping CO0,0-0,9
Arendals Fossekompani0,0-0,9
Austevoll Seafood0,0-0,9
Borr Drilling0,0-0,9
FLEX LNG0,0-0,9
Gaming Innovation Group0,0-0,9
Hexagon Composites0,0-0,9
Komplett Bank0,0-0,9
Magseis Fairfield0,0-0,9
MPC Container Ships0,0-0,9
Nordic Nanovector0,0-0,9
Northern Drilling0,0-0,9
Norwegian Air Shuttle0,0-0,9
Norwegian Energy Company0,0-0,9
Norwegian Finans Holding0,0-0,9
Ocean Yield0,0-0,9
Odfjell drilling0,0-0,9
Olav Thon Eiendomsselskap0,0-0,9
Otello Corporation0,0-0,9
Protector Forsikring0,0-0,9
Pareto Bank0,0-0,9
Selvaag Bolig0,0-0,9
Shelf Drilling0,0-0,9
Solon Eiendom0,0-0,9
SpareBank 1 BV0,0-0,9
SpareBank 1 Ringerike Hadeland0,0-0,9
SpareBank 1 Østfold Akershus0,0-0,9
Sparebanken Møre0,0-0,9
Sparebanken Vest0,0-0,9
The Scottish Salmon Company0,0-0,9

This year’s analysis of the 100 largest companies on the Oslo Stock Exchange reveals that many companies lack a systematic approach to sustainability reporting. However, the trend is positive compared to last year. This is good news for investors and society at large – sustainability has become less noise and more substance.

Impact of Covid-19 on Valuations and Debt

Impact of Covid-19 on Valuations and Debt

The extensive economic changes provoked by the COVID-19-crisis have led to some urgent questions regarding the business valuation.  In the process of business valuation, one should consider “all significant information that could have been obtained with due care up to the valuation date”. Therefore, business plans within the detailed planning phase would need to be adapted accordingly, if the consequences of the COVID-19-crisis were already foreseeable on the valuation date.

Many factors lead to a massive increase in planning uncertainty at the present. First, long-term health implications cannot be evaluated orderly at the moment. Second, governments around the world found themselves forced to arrange significant economic restrictions in light of these health-related insecurities. Especially the shutdown of entire industries has affected the economy in a negative manner. Third, nobody can anticipate how long those restrictions will last.

The effects of the COVID-19-crisis are not limited to the short view, long-term aspects have to be considered additionally. Even though the global development of the current situation cannot be anticipated accurately, it can be assumed that long-term negative effects on cash flows strongly depend on a company’s business model and thereby its robustness and resilience.

Due to the current market situation, cash flows need to be adjusted in the detailed planning phase. Nonetheless, whether the crisis has to be considered in the terminal value strongly depends on the underlying business model and is therefore not that clear. This also applies to the growth rate within the terminal value. At the present, there are no hints indicating the requirement of adjusting the long-term valuation parameters when the underlying business model can be seen as robust.

Negative Interest Rate

Since the base interest rate is usually seen as a proxy for the risk-free rate, it plays a crucial role in business valuation. In the context of the Capital Asset Pricing Model (CAPM) the base interest rate plays an important role in determining the cost of capital as well as the market risk premium. To begin with, the low-interest environment has existed even before the COVID-19-crisis. By the mid of 2019, negative risk-free rates were already observable. However, after the interest situation has somewhat improved and interest rates turned positive again (at least temporarily), the COVID-19-crisis has triggered a renewed downward-trend. The spot rate of the 10-year Croatian Government Bonds fell to an historical low of about 0,99%.

Source: Tradingeconomics

The COVID-19 Beta Effect

For some companies, we observe that Beta as a measure of the volatility of the company’s equity value relative to the market has decreased. This reflects an increase in correlation between the company’s equity return and that of the overall market. To the extent an analyst believes the cost of equity should have increased to reflect a higher risk in the projected financial information, an offsetting adjustment can be made to the company-specific risk premium that compensates for the change in the risk-free rate and a possible beta decline. The order of magnitude of any adjustments to the company-specific premium will depend on the company’s specific risk profile in terms of factors such as profitability relative to its peers, financial and operating leverage, liquidity, operational efficiencies to name a few.

In finance, the relationship between an equity’s returns and that of the overall market is measured by beta. Stocks with betas over 1.0 have greater systematic risk than the market as a whole. So if the market rises 1%, high beta, riskier stocks like tech, pharma, and luxury goods companies will increase by more than 1%. Conversely, if the S&P 500 drops 1%, they will fall by a greater percentage.

Source: Damodaran

Company specific risk premium

If Covid-19 happened to affect the subject company more dramatically than its competitors due to specific circumstances (e.g. severe outbreaks and/or lockdowns in locations of manufacturing plants, contingency plans, and procedures not put in place, key personnel being in quarantine or caught in a lockdown abroad, etc.), an increase in company-specific risk premium may make sense. Still, because this premium is very subjective, it should be considered only if the valuer is not able to assess the duration and intensity of adverse circumstances on cash flows.


It is sensible to put more effort in developing reasonable forecasts of cash flows or scenarios, instead of risking overestimating a discount rate. This is especially the case if V-shaped or U-shaped recovery can reasonably be expected for a subject company, implying quicker recovery. Valuers also need to keep in mind the long-term aspect and avoid undue wariness. Arguably, residual value calculation and assumptions do not need to be changed. This is not the first nor the last crisis, it shall also pass, and recovery will follow. On the other hand, not all industries have been affected dramatically, or even adversely, global demand for certain products has increased, many have switched to e-commerce, shifted to remote working, etc. In terms of methods to be employed, depressed multiples due to sell-off will definitely be a conundrum for some time. Possible distressed M&A activity may also distort transaction multiples. Therefore, results obtained from an income approach may be more meaningful than those from the market approach.