Application and Dissemination of Value-Based Eco-Ratings in Financial Markets

This project pursued the sustainable value approach, i.e. the first value-oriented approach to ecological company assessment. A study was produced and published in which at least 50 European companies were assessed using value-based eco-ratings. The aim was to show how much these companies contributed to a more sustainable economy in the EU and what contribution they made to achieving the goals of European economic and environmental policy.

In this project, the value-oriented logic of the financial markets was applied to eco-ratings for the first time. To this end, the environmental and economic performance of listed companies was evaluated and the feasibility of value-oriented eco-ratings was demonstrated under practical conditions on a large scale. Up to now, ecological company ratings have been carried out according to a burden-orientated logic: This involved attempting to rate the various environmental impacts caused by a company according to their harmfulness and thus make them comparable. In practice, however, this approach quickly reaches its limits, as the relative importance of different environmental problems cannot be determined.

The Sustainable Value approach pursued in this project was the first value-oriented approach to ecological company valuation. Instead of assessing their harmfulness, Sustainable Value evaluates the use of ecological resources on the basis of their relative contribution to value generation. To this end, it takes up the practice of the financial markets and evaluates the use of ecological resources analogue to the use of financial resources on the basis of their opportunity costs. This approach enables a value-oriented eco-rating and expresses sustainable corporate performance in a monetary indicator without having to rely on the monetisation of external effects.

In the ADVANCE project, the value-oriented Sustainable Value approach was applied to the creation of eco-ratings. The aim of this project, which was funded by the European Commission as part of the LIFE programme, was to demonstrate the feasibility and potential of value-based eco-ratings in financial markets and to communicate the relevant application knowledge to the most important financial market players. Through the practical application of the ratings and the dissemination of the relevant knowledge, the project made a decisive contribution to financial market players taking environmental aspects into account and thus making financial market decisions more sustainable.

The project comprised three components:

In the empirical part of the project, a study was carried out and published in which at least 50 European companies were assessed on the basis of value-based eco-ratings. This showed how much these companies contributed to a more sustainable economy in the EU and what contribution they made to achieving the goals of European economic and environmental policy. This was done in partnership with four European eco-rating agencies. The involvement of the eco-rating agencies supported the effective transfer of applied knowledge and strengthened the role of the eco-rating agencies as SMEs.

In the second part of the project, a handbook for practitioners on the preparation and application of value-based eco-ratings was produced to further disseminate the results of the study and the value-based method for eco-ratings. This handbook was aimed at financial market players in three different European countries (including one new EU member state) in the form of training events and explained step by step how value-based eco-ratings could be produced, interpreted and used.