Factors of sustainable development to be considered in the financial modelling of investment projects

Abstract

Subject. The development of financial models is an essential tool of investment analysis, which allows evaluating the commercial attractiveness of projects with due consideration of the involved risks. The most pressing risks that have an impact on the key parameters of financial models of many investment projects are related to sustainable development factors. The article examines the issues regarding the influence of sustainable development factors on the development of financial models of investment projects. Method. The methods of the investigation included logical, statistical, and financial analysis. The study also used data from IFRS-based financial statements, presentations for investors provided on the websites, and public non-financial reporting of Russian companies (sustainability reports, integrated reporting), data concerning the SDG indicators of Rosstat and analytical and rating agencies, the results of international research, and recommendations by professional organisations. Objectives. A comprehensive study of the problem concerning the development of financial models with due account of the sustainable development requirements, risks, and opportunities for the benefit of investment decision making. Results. A quantitative assessment of financial implications of the impact of ESG factors on the parameters of the financial model requires detailed empirical studies based on a wide range of criteria. A lack of transparency in relation to applied methods of analysis and data used to assess the impact of ESG factors on the financial performance of investment projects makes it difficult to develop an investment analysis methodology and to propagate best practices. In order to develop a common approach and to generalise the results of the study, a sequence of procedures was recommended aimed at the integration of ESG factors in the development of a financial model.