The perpetual compound annual rate that a company's cash flow is assumed to change by...

Indiscounted cash flow (DCF) valuation models, theterminal growth rateis the rate at which a company’s free cash flows are expected to grow indefinitely beyond the forecast period. This rate is critical in estimating theterminal value, which often accounts for a substantial portion of the company’s total valuation.

“Valuation-model variables such as cost of capital or terminal growth rates in discounted cash flow analysis… are adjusted based on ESG assessments.”

It is distinct from thediscount rate(used to discount cash flows back to present value) and therequired rate of return(expected by investors). The terminal growth rate specifically refers topost-forecast period assumptions.