Sustainability Considerations in Capital Budgeting Decisions: A Survey of Financial Executives

Abstract

This study focuses on the environmental dimension of sustainability and examines the impact of sustainability on capital investment decisions.  In particular, the study aims to reveal whether the extent to which an investment is considered to be in sustainable technologies affects capital investment decisions.  Based on our analysis of responses to an online survey facitlitated by the IMA, the study finds that, for most companies the sustainaility dimension is not a significant consideration in capital investment decisions.  That is, capital investment opportunities are evaluatred based on traditional financial measures, such as net present values and internal rates of return.  Results are generally not affected by the existence of a formal sustainability program, company size, or whether the company is publicly or privately held.