Opening Address at The IVAS-IVSC Business Valuation Conference 2021

Mr Alistair Darling, Chair of the Board of Trustees of IVSC

Mr Chaly Mah, Chairman of SAC

Mr Harsha Basnayake, Chairman of IVAS

Distinguished guests

Ladies and gentlemen

Good morning. I am delighted to join you virtually for the second year running at today’s IVAS-IVSC Business Valuation Conference.

Intangibles, ESG and Long-term Value as Drivers of Business Valuation

2 The theme for this year’s conference is ‘Reframing Valuations: Intangibles, ESG and Long-Term Value.’ This theme is especially relevant today in the face of the COVID-19 pandemic - as business valuation globally is increasingly driven by intangible assets (IA), environmental, social and governance (ESG) factors and long-term value.

3 New innovations have emerged rapidly as we cope with disruptions arising from COVID-19.

a. For example, Singapore-based AOS offshore built its own Remote Operating Underwater Vehicle to cope with global supply chain disruptions[1].

b. Companies have also developed technological solutions for real-time visibility on employee engagement and stress levels, with the shift towards remote working.

c. As the economy is increasingly driven by innovation and companies develop new technologies, IA such as patents and trademarks have grown in importance. The value of IA has surpassed that of tangible assets – standing at an all-time high of more than US$65 trillion.

d. Being able to reliably value these critical assets is thus necessary to help enterprises effectively unlock the value of their IA and use them for growth.

4 The pandemic has also underscored the importance of a business’ long-term ability to withstand unforeseen, systemic shocks.

a. There is growing recognition of, and support for, long-term enterprise value creation and the use of sustainability metrics.

5 Given that valuation and sustainability are growth areas, I would like to highlight Singapore’s efforts in these areas, which will benefit our businesses and professionals.

Improved Disclosures for Business Valuation

6 In line with this shift towards intangibles, ESG and long-term value, Singapore has launched earlier this year:

a. Singapore Intellectual Property Strategy 2030 (SIPS 2030) to strengthen Singapore’s IA and Intellectual Property (IP) regime; and

b. Singapore Green Plan 2030 on sustainable development.

7 While these two national-level strategy and movement have different objectives, one thing is common between them – they both encourage better disclosures by businesses.

a. This is relevant to business valuers as improved disclosures reduce informational asymmetry in the ecosystem, which in turn supports business valuation.

b. Let me share some of the initiatives to encourage better disclosures under these national plans.

SIPS 2030

8 First, SIPS 2030. We want to develop the valuation space for IA and IP to:

a. Position Singapore as a global hub for IA and IP activities;

b. Attract and grow innovative businesses using IA/IP; and

c. Grow jobs and opportunities for Singaporeans.

As such, it is important to build a credible and trusted IA/IP valuation ecosystem.

9 There is currently no standardised IA/IP reporting framework[2] internationally.

a. Given the growing calls for better information on IA/IP, an industry-led working group is being formed through public-private partnership to co-develop an IA/IP disclosure framework.

b. While the disclosure framework is still a work-in-progress, I am confident that it will help Singapore businesses better communicate the value of their intangible assets.

Singapore Green Plan 2030

10 Second, the Singapore Green Plan. One of its key pillars is to pursue a green economy, and develop Singapore into a leading centre for green finance.

a. Valuation in relation to green finance would contribute to the urgent efforts to address climate change, and at the same time, help Singaporean professionals gain access to a growing high-value industry.

b. The Monetary Authority of Singapore has launched several initiatives to improve disclosures. This would facilitate valuation, and mobilise capital to finance transition to a low carbon, sustainable economy.

i. These include the development of an implementation guide for climate-related disclosures by financial institutions, and setting out roadmaps on mandating climate-related reporting for financial institutions and listed entities in Singapore.

International Developments on Business Valuation

11 On an international level, I am glad to learn that the valuation profession has come together to reframe valuations with the shift towards intangibles, ESG and long-term value.

a. IVAS, alongside leading valuation professional organisations[3], have formed an international working group to:

i. Develop a list of ESG and IA-related disclosures that impact enterprise value;

ii. Work with standard-setters to include ESG and IA-related disclosures as part of global reporting requirements; and

iii. Develop a set of ESG and IA valuation guidelines aligned to the International Valuation Standards.

b. As we develop Singapore to become a thought leader in valuation, we contribute to the efforts to strengthen the valuation ecosystem, which will in turn be beneficial for our businesses and professionals.

Up-skilling to be Future-ready

12 Indeed, there have been significant, parallel developments in the business valuation space. Amidst these developments, it is crucial that business valuers constantly up-skill and be future-ready. Let me suggest two ways in which you can do so.

13 First, equip yourself with the necessary technical competencies to conduct valuation.

a. I strongly encourage one to leverage the Chartered Valuer and Appraiser programme (CVA) to build a robust foundation in business valuation.

b. The CVA programme has helped many individuals to adapt and apply valuation techniques in the face of new trends such as IA and ESG.

i. For example, the CVA programme provided Ms Sophia Tian, a Director with Ernst and Young, with essential knowledge of valuation concepts. This has helped her tremendously as she applied the concepts to:

1. Assist companies in the valuation of their IP for debt financing; and

2. Measure and value sustainability efforts.

14 Second, conferences like today’s, which feature speakers with vast experiences and diverse viewpoints, are particularly useful to raise awareness to existing trends and upcoming opportunities, so that business valuers remain relevant.

a. It is heartening to see many of you taking the time to be here today, to keep up with the industry trends and learn more about the business valuation profession.

Conclusion

15 Business valuation is a dynamic area of work that covers a spectrum of considerations from intangibles to sustainability. Even as it becomes more challenging with the accelerated pace of change around us, I encourage all of you to keep pace with developments in the valuation space, and leverage this conference to exchange insights on areas of growing importance. By doing so, I am certain that you’ll be able to value-add to businesses.

16 Thank you, and I wish you a fruitful conference ahead.

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[1] https://www.edb.gov.sg/en/business-insights/insights/how-3-companies-in-singapore-redefine-problems-as-opportunities.html

[2] Internationally, there exists a range of IA/IP reporting methodologies promulgated by academics and international organisations, but no jurisdiction has developed a standardised IA/IP reporting framework.

[3] These organisations include but are not limited to American Society of Appraisers, Chartered Business Valuator Institute, and Royal Institution of Chartered Surveyors.