This final section discusses how to incorporate non-financial goals in the capital budgeting process. The challenge is that many environmental, social, and governance (ESG) factors do not have a binding market price and are therefore not reflected in a standard NPV-analysis, which should always rely on market prices. The section discusses the growing relevance of these non-financial goals and shows that investors increasingly ask for sustainable returns. Then we present a simple Adjusted Present Value (APV) approach that allows us to incorporate ESG factors for which cost estimates or quasi-market prices exist (e.g., the emission of carbon dioxide).
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