Financial Valuation under High Country Risk: ESG Effects on Cash Flows, Cost of Capital, and Equity Value

Abstract

Corporate valuation under elevated sovereign, geopolitical, and financing risk increasingly requires sustainability information to be translated into explicit changes in operating cash flows, required returns, and shareholder value. Previous research has documented links between environmental, social, and governance (ESG) performance, financing costs, and firm value but has rarely integrated these channels within one intrinsic-valuation architecture for agribusiness companies in a high-risk economy. This study assesses how environmental, social, and governance characteristics affect corporate value by comparing conventional and ESG-adjusted free cash flow-to-the-firm valuations and tracing operating, discount rate, terminal value, and leverage effects. The analysis covers three publicly listed Ukrainian agribusiness companies (Astarta Holding N.V., Kernel Holding S.A., and MHP SE), using financial and sustainability disclosures for 2019–2024, forecasts for 2025–2029, and market inputs embedded in the valuation workbooks. The methodology combines discounted cash-flow valuation, symmetric cash-flow and discount-rate attribution, horizon decomposition, valuation and shareholder transmission multipliers, terminal-growth and two-way discount-rate sensitivity, effective duration and convexity, break-even thresholds, leverage stress, market-consistency diagnostics, and reverse discounted cash flow. After aligning the nominal-USD cost-of-equity specification with the currency of the forecast cash flows and discounting the prorated 2025 cash flow over the corresponding fractional stub period, the central 5% perpetual-growth specification yields baseline and ESG-adjusted enterprise values of USD 553.0 million and USD 639.8 million for Astarta Holding N.V., USD 944.8 million and USD 1,180.7 million for Kernel Holding S.A., and USD 1,809.7 million and USD 2,164.9 million for MHP SE. The corresponding enterprise-value uplifts are 15.70%, 24.96%, and 19.63%, while the score-linked free-cash-flow adjustment rates are 3.71%, 4.47%, and 3.26%, and the effective weighted average cost of capital declines by 2.94, 3.83, and 2.25 percentage points. Symmetric attribution shows that discount-rate repricing explains 75.0%, 80.3% and 82.1% of the total enterprise-value uplift, while the terminal component contributes 66.6%, 71.0% and 81.3%. Capital structure magnifies shareholder outcomes, particularly for MHP SE, where the shareholder transmission multiplier is 47.02. Sensitivity analysis confirms that the positive enterprise-value effect persists across the 3–10% perpetual-growth range, although its magnitude remains dependent on long-run assumptions. The framework provides investors, creditors, valuation professionals, and reconstruction-finance institutions with a replicable basis for incorporating sustainability information into investment appraisal, credit analysis, and corporate valuation under high country risk, while supporting cross-country and cross-sector testing.