The rising relevance of intangible assets, measured via subscription to environmentally-sustainable initiatives, is seen to continue increasing companies’ market value.
Sustainability & Climate Change Leader for South East Asian Consulting Services company PWC, Andrew WK Chan, said investors or shareholders putting more importance in addressing environmental and societal issues has been pushing companies to likewise adapt the same mindset to boost their market value and realign their purpose.
“There’s this increasing paradigm shift — businesses are not just for profit, but also for purpose. When you look at the value of companies nowadays, the component of the value has shifted,” Chan said in the 17th Managers’ Association of the Philippines’ (MAP) CEO Conference in Makati on 10 September.
Citing a 2015 study by the Ocean Tomo on the Intangible Asset Market Value of S&P 500 companies, Chan said intangible assets accounted for 84 percent of the companies’ market value in 2015 from just 80 percent in 2010 and 17 percent in 1975.
These intangible assets include brand value, reputation, research and development, customer satisfaction, health and safety, environmental performance, social license to operate, governance and employee engagement.
On the other hand, tangible assets — whose market value has been reduced to 16 percent in 2015 from 20 percent in 2010 and 83 percent in 1975, according to the study — includes financial capital and physical assets.
Meanwhile, in line with the shifting interest, PWC MAP’s 2019 CEO Survey states that 80 percent of the respondents revealed plans to shift their production or service model in the next three to five years to one that promotes more sustainable practices.
Still, the same survey conducted on 133 chief executive officers in the Philippines noted that only 33 percent have formal plans to fully adopt a circular business model, or one that “maximizes the use of certain resources in order to avoid value leakage,” MAP said.