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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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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
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
slide16

Innovation:

  • Products
  • Process

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
slide20

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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