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Lecture Sustainable Investment Model. Jan H. Jansen E-mail: [email protected] About Jan H Jansen. Senior lecturer International Finance Management Accounting Researcher Chair of Total Quality Management in Organizational Networks Chair of Logistics & Alliances Supervisor

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Lecture sustainable investment model

Lecture Sustainable Investment Model

Jan H. Jansen

E-mail: [email protected]


About jan h jansen
About Jan H Jansen

  • Senior lecturer

    • International Finance

    • Management Accounting

  • Researcher

    • Chair of Total Quality Management in Organizational Networks

    • Chair of Logistics & Alliances

  • Supervisor

    • Internships / Placements

    • Graduation projects / Dissertations




Problem
Problem

  • Can Sustainable Investments contribute to a better future ecology?

  • Ecological impact of:

    • Energy production

    • Energy consumption


Sustainable investments
Sustainable Investments

  • Energy production

    • Traditional

      • Oil

      • Gas

      • Coal

      • Nuclear

    • Sustainable

      • Wind

      • Hydro

      • Solar

      • Biomass

      • Geothermal


Sustainable investments1
Sustainable Investments

  • Energy consumption

    • Transport

      • Inland vessels

      • Rail

      • Road

        • Trucks

        • Cars

    • Houses

      • Use of rainwater & sewage water

      • Use of solar cells & wind turbines

      • Insulation & energy management systems

    • Factories

      • Re-use of industrial warmth

      • Geothermic storage of industrial warmth

      • See also under Houses



Renewable energy in final energy consumption 2020 target source www energy eu
Renewable energy in final energy consumption (2020 target) Source: www.energy.eu


Renewable electric energy in the eu
Renewable electric energy in the EU

Resource: www.energy.eu


Sustainable investments2
Sustainable Investments

  • Sustainable

    • Added value for social welfare

    • Better & optimal allocation of scarce natural resources

  • Investment

    • Capital

      • Equity

      • Debts / Loans

    • Recovery

      • Repayment Debts

      • Payment interest

      • Profitability



Dosit model
DOSIT Model

Model developed by:

  • TNO (Applied Research in Science)

  • Research Chair of TQMinON

    • Prof. Gerard Berendsen

  • Source:

    • Duurzaaminnoveren met de DOSIT-methodiek, G. Berendsen cs, Sigma Kluwermanagement, June 2006

    • http://www.han.nl/onderzoek/kennismaken/ontwikkelen-van-excellente-organisaties/lectoraat/tqm-in-organisatienetwerken/publicaties/_attachments/kip_c2-11_20duurzaam_20innoveren_20met_20de_20dosit_20methodiek.pdf


Dosit model1

Dutch

Duurzaam

Ondernemen

Selectie

Innovatieve

Technologie

DOSIT

English

Sustainable

Entrepreneurial

Selection

Innovative

Technology

SESIT

DOSIT Model


Why dosit
Why DOSIT?

Hot topics in business are:

  • Innovation

    • Product innovation

    • Innovation of processes

  • Sustainability / CSR

    • Stewardship / Managership / Bailiff (UK) (Dutch: Rentmeesterschap)

  • Investments


Sustainability

Investing


Sustainability entrepreneurship in sme s
Sustainability & Entrepreneurship in SME’s

  • Company meets the requirements from the government and keeps in mind future requirements

  • Company fulfils its social and cultural role in society

  • Company plays in an effective way its role in the huge changes in society & economic development for the mid and long term


Sustainability entrepreneurship in sme s1
Sustainability & Entrepreneurship in SME’s

  • The product, the way the product is used and will be used

  • The production process (including resources)

  • The way the product is introduced on the market


Basic assumptions dosit model
Basic assumptions: DOSIT model

  • Focus as a company on a limited number of activities connected to sustainability

  • Intrinsic motivation of staff concerning change in general and sustainability in specific

  • Communication in the company concerning sustainability: Top Down & Bottom Up

  • ‘Quick and dirty job’ in SME’s, staff wants to see immediately results

  • Aspects of sustainability have influence on the continuity of the company

  • Sound financial base is important for the continuity of the company


Profit

People

Planet

3 P’s


Stages in the dosit methodology
Stages in the DOSIT methodology

  • Preparation

  • Choice of priorities in the areas of Key Success Factors

  • Selection of possible Innovations

  • Final choices of Innovations

  • Implementation of Innovations


Elements of the dosit model
Elements of the DOSIT model

  • Supply Chain & Value Chain

  • Raw materials

  • Components

  • Business development

  • Logistic Processes (I >T > O)

  • Production

  • Packaging

  • Warehousing & Distribution

  • Product & Market Development

  • Product Use / Reversed Logistics



Constraints in the process of sustainable innovation
Constraints in the process of sustainable innovation

  • ROI requirement (bottom line)

  • Requirements clients

  • How do process interfere in the chain?

  • Feasibility (in a technical way)

  • Connection with future developments & ambitions of the company

  • What is target for the degree of sustainability

  • How much will be the impact of the innovation (paradigm shift?)




Project structure
Project Structure

Source : Project Finance, Yescombe


Ring fenced project
Ring-fenced project

Source : Project Finance, Yescombe



Financing

Investment

Equipment

Building

R&D

Environment

Sustainability

Staff / HR

Maintenance

Operating costs

Funds

Equity

Loans

Financing


Investment recovery

Cash Outflows

Equipment

Building

R&D

Environment

Sustainability

Staff / HR

Maintenance

Operating costs

Cash Inflows

Sales

Lower costs

Investment recovery


Components capital budget model
Components Capital Budget Model

  • Investment (Year 0)

  • Economic Life of the Investment

    • Years 1 - n

  • Interest Rate: i = r + π + σ

    • r = real interest rate

    • π = inflation

    • σ = risk (project risk mark-up)

  • Annual Cash Flows (During economic life)

    • Expenses

    • Revenues


  • Decision criteria
    Decision Criteria

    • Pay Back Period (PBP)

    • Return On Investments (ROI)

    • Break Even Time (BET)

    • Net Present Value (NPV)

    • Profitability Index

    • Internal Rate of Return (IRR)

    • Debt Service Coverage Ratio (DSCR)


    Weighted average cost of capital k wacc
    Weighted average cost of capital (kWACC)

    Cost of equity (ke) with the Cost of debt (kd)

    in proportion to the relative weight of each

    in the firm’s optimal long-term financial

    structure:

    kWACC = ke* E+ kd * (1-t) *D

    V = E + D

    V

    V


    Capital asset pricing model capm
    Capital asset pricing model (CAPM)

    CAPM defines the cost of equity (ke) for a

    firm as :

    ke = krf + βj * (km – krf)

    krf= interest rate on risk-free bonds

    km = expected (required) rate of return on

    equity

    βj = firm’s systematic risk coefficient

    risk free

    premium






    The complexity of an investment decision
    The complexity of an investment decision

    Bookkeeper

    Entrepreneur

    Present

    Past

    Future

    20 years of uncertainty


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