Investment Appraisal of Sustainability Projects

Abstract

This chapter is an attempt to review the existing approaches in appraising sustainability projects using the conventional approaches of net present value (NPV) and introduce the modified forms of NPV (i.e., net present sustainable value [NPSV]). The chapter also elucidates on the prominent characteristics of sustainability projects and the inadequacy of traditional financial tools in appraising the same. Consequently, the need to transition from using only time value of money as in payback period approach to include opportunity costs as in NPV and furthering this approach to broaden the capital theory of sustainability by including both the time value of money and the opportunity costs has been strongly advocated. In addition to controlling the time value of money, risk-adjusted NPV measures are effective in evaluating sustainability projects. For assessment of renewable energy projects, real option analysis is suggested as an effective measure.