Assignment: Group Case Study 1
Title: CLP Group: Environmental, Social, and Governance Factors and Their Effects on Valuation
Due Date: February 7, 2025 (11:59 p.m.)
Submission Method: Avenue to Learn
Each group will analyze the case study on CLP Group and prepare a memo-style. response addressing the questions outlined below to facilitate Susan Chen in achieving her objective. Your memo should be concise and limited to three pages, excluding appendices. The appendix may include supporting tables, calculations, graphs, and other relevant materials if necessary. You will be evaluated based on your ability to connect the concepts from the case study to course materials, the depth of your analysis, and the clarity of your writing. Late submissions will be subject to grade deductions per course policy.
The memo should clearly address the following questions:
1. What is the key objective of Susan Chen? (1 point)
2. What are some important mechanisms that could affect CLP’s financial performance? Identify at least three key mechanisms, which may include factors, actors, or macro trends (e.g., customers, employees, etc.). Explain how these mechanisms would influence CLP's valuation, specifying the relevant valuation channels in a Discounted Cash Flow (DCF) model. (9 points)
3. Complete Exhibit 9B from the case study package (A) by:
(i) Justifying how each of the key mechanisms identified in Question 2 may impact one or more of the core business drivers of utility companies as outlined in Exhibit 9B. If necessary, you may add additional core drivers to the Exhibit based on the key mechanisms you identified. (3 points)
(ii) Identifying at least five key performance indicators (KPIs) that are considered material, after clearly defining "material" to Susan. Justify the selection of these material KPIs. Additionally, provide examples of KPIs that are immaterial and briefly explain why they do not meet the materiality criteria. (12 points)
4. Do you think that the market has already priced ESG factors into CPL’s value as revealed by the base case valuation? Discuss why or why not. (2 points)
5. Develop a valuation approach integrating ESG factors to support Susan’s objective. Incorporate relevant KPIs and disclosed ESG performance data, and justify the projected impacts on cash flows, growth rates, and the cost of capital based on Susan’s rationale. (8 points)
6. Which stage of Sustainable Finance does this approach align with based on class material? Briefly discuss any shortcomings or limitations of this approach. (2 points)
Please ensure clarity, proper grammar, and correct spelling in your writing. (5 points)
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