Carbon pricing and company analytics. Company analysis and valuation is a process that consists of several steps. Where relevant, we should incorporate the cost associated with greenhouse gas emissions into this analysis and valuation regardless of whether the cost arises from carbon taxes or emissions permits. So how do we do this? The approach can be viewed as an extension of our usual process for company analysis and valuation. We start with understanding the business. That is, we understand the industry, the competitiveness, the financial statements. However, it needs to include explicit identification of ESG risks and opportunities and their materiality with a particular focus on the carbon risk of the business. Next, we forecast company performance. Analysts carry out in-depth analysis and forecasts of individual business lines and emissions associated with those activities. Alternatively, the analyst can estimate the company's overall emissions for a discrete forecast period based on the company's existing level of emissions, growth forecasts, and anticipated change in business model or technologies as the company takes steps to decarbonize its operations. The carbon price, either in the form of tax per tonne or cost of emission permit, would then be reflected in the forecast cash flows of the firm. Having established a view on the firm's outlook and forecast the earnings and cash flows, the analyst would then proceed to value the company's shares or bonds using one of several valuation methods. For example, when valuing the shares, they would choose to use DCF valuation or relative valuation using appropriate multiples. The analyst can then use the valuation in the usual way to conclude on whether the shares or bonds should be on a buy, sell, or hold recommendation.