When integrating governance factors into decision-making, a fund manager with a simple level of confidence in the valuation range is most likely using:
TheGovernance Integrationsection of the OTM outlines several approaches for incorporating ESG insights into valuation and risk analysis. It notes:
“Athreshold assessmentapproach is used when the analyst or manager appliesbasic confidence levelsto valuation estimates, reflecting judgmental thresholds rather than full quantitative integration.”
This method allows a simplified decision framework for governance quality — for instance, adjusting valuation multiples or discount rates modestly when governance practices fall below acceptable thresholds. In contrast, “risk assessment” is broader and more data-driven, while “stewardship dialogue” is an engagement activity, not a valuation technique.
Thus,option Bprecisely describes the practice where governance factors influence valuations through structured, threshold-based confidence judgments.
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