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2020 | Book

Introduction Read chapter Read first chapter

Sustainability in Business

A Financial Economics Analysis

Author: Prof. David Hobson Myers

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

This book provides an approach to sustainable decision-making rooted in financial and economic literature. Financial economic techniques have the power to frame the discussion of sustainability to explain who, how, and why sustainability is a growing phenomenon in business and investing. Financial concepts in a sustainable framework provide a theoretical basis to approach research and business questions on sustainability. The framework provides for a better understanding of the different definitions of sustainability and the role those differences have on decisions that will lead to the future of sustainable business. A future which relies on growth driven by expanding its markets’ reach (demographics), its innovation or creation of new products, and its capital structure (leverage). Third party certification and governmental regulation become the constraints on that growth as well as the proof of sustainable growth. Finally, the ability and methods for investors to support sustainable growth is addressed in a modern portfolio theory analysis.

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
The introductory chapter lays out the case for the approach to sustainability in a financial economics framework. Discussion of different definitions of sustainability frames how those definitions affect the approach researchers, students, and business people take in determining their decision making. The contrast between traditional finance, Friedman’s “Maximize Shareholder Wealth,” and sustainability’s double or triple bottom lines (environmental, social, and governance or profit, people, and planet) are laid out as the foundation for those discussions.
David Hobson Myers
Chapter 2. Economic Models
Abstract
This chapter introduces utility functions and concentrates on consumption for both the individual and society. Given the contrast between maximizing shareholder wealth and triple bottom lines, this chapter will discuss utility functions with an emphasis on consumption models. The case for sustainability will rely on social distance measures for the intergenerational and intragenerational transfers where the utility is a function of time value of money and social distance (Becker 1968 and Anderson and Myers 2018). The discussion of utility will be supplemented with discussions of von Neumann–Morgenstern Utility, transitivity, and one-period models versus multi-period models as a means of discussing the framing of sustainability beyond traditional finance models.
David Hobson Myers
Chapter 3. Growth and Business Sustainability
Abstract
This chapter introduces a discounted cash flow approach to valuation of business ventures and highlights the key elements of growth. The success of a business, sustainable or not, is dependent on its growth. Expansion of a business relies on expanding its markets’ reach (demographics), its innovation or creation of new products, and its capital structure (leverage) within a legal and governmental framework. The interplay of social distance and demographics highlights the markets that a business may expand as it builds customer relationships. Those relationships will be based on the marketing of innovative sustainable products to new markets. The role of leverage on capital structure will be laid out within a risk and return framework.
David Hobson Myers
Chapter 4. Certification of Sustainability
Abstract
This chapter introduces the reader to different ratings created and employed to measure sustainability. In building relationships with consumers for sustainable products or business, the trust and certification of sustainability is dependent upon measurement. The chapter will discuss methods of certification through organizations such as LEED, Bloomberg’s ESG, MSCI KLD, and other assurances of sustainability. The strengths and weaknesses of the measurability will be highlighted by the presence of false advertising known as “greenwashing.”
David Hobson Myers
Chapter 5. Corporate Implementation and Business Forms
Abstract
This chapter highlights the different legal structures for business and how sustainability fits with those structures. Corporate or business implementation strategies are covered. Implementation of structure and process in a sustainable framework highlights investments in products through a sustainable net present value (SNPV) process or business structure. Differences in structure and form such as B-Corps, non-profits, institutions, partnerships, and corporations are discussed within the area of sustainability.
David Hobson Myers
Chapter 6. Investment Implementation
Abstract
This chapter provides a review of the investment opportunities and strategies for sustainable-minded investors. A review of the historical sustainable movement from ethical screens to socially responsible investment to mission related and impact invest investing highlights changes in the costs of monitoring and investor interest that have created a greater funds flowing to sustainable investing. Strategies from positive and negative screening to shareholder activism as well as best in class are discussed.
David Hobson Myers
Backmatter
Metadata
Title
Sustainability in Business
Author
Prof. David Hobson Myers
Copyright Year
2020
Electronic ISBN
978-3-319-96604-5
Print ISBN
978-3-319-96603-8
DOI
https://doi.org/10.1007/978-3-319-96604-5