PROPOSING A COMPREHENSIVE INVESTMENT ANALYSIS METHOD

The traditional cost benefit analysis and its further developments can be used as basis for the integra­tion of SD principles into the investment analysis of a project. The use of a comprehensive investment analysis method considering SD principles lays the basis for a holistic and sustainable investment.

The selection of an adequate investment analy­sis method that fits to the organizational need and ensures a high flexibility to include SD aspects is the basis for a holistic investment decision. Traditional investment analysis methods consider only economic aspects and some methods are not flexible in integrating SD principles. Further de­velopments such as the social cost benefit analysis are more holistic and focus also on social cost and benefits but don’t allow the description of eco­logic aspects. Environmental Impact Assessments focus on social and ecologic aspects but exclude economic aspects. Approaches from multilateral development agencies focus on the consideration of SD principles in the project initiation, especially when analyzing the investment. The social cost benefit analysis methods from UNIDO or the World Bank (Bruce et al. 1976; Dasgupta et al. 1972; Little/Mirrlees 1974; Squire/Van Der Tak 1975), the concept of responsible investments (Louche/Lydenberg 2011), ethical investments (Michelson et al. 2004; O’rourke 2003), or the LFA (Norad 1999) are good examples of how SD principles can be integrated into investment analysis methods.

Table 4. Criteria according to the investment analysis of LFA (Norad, 1999, p. 44)

Based on our analysis of standards and the literature, we summarize the following topics as important for a comprehensive investment analysis method:

• The consideration of a stakeholder perspective.

• A qualitative and non-monetary cost ben­efit description.

• The consideration of economic, ecolog­ic, social as well as local, regional and global consequences when analyzing the investment.

• Costs and benefits for the investment but also for the project initiating the investment.

The Consideration of a Stakeholder Perspec­tive: It is one guiding principles of responsible investment to adopt a stakeholder perspective in the investment analysis. This means that e.g. the costs and benefits of the stakeholders are consid­ered. Knowing costs and benefits of important stakeholder allows one the one hand to consider these aspects when making the investment decision and on the other hand allows to plan actions and measures to minimize the costs of the stakehold­ers. Stakeholder costs are often non-monetary e.g. noise disturbance during construction and therefore not considered in traditional investment analysis methods. Gareis et al (2013) mentioned the importance to analyze the stakeholder perspec­tive when analyzing the investment.

A Qualitative and Non-Monetary Cost Benefit Description: To allow a qualitative and non­monetary description of costs and benefits is one further step to reach a more holistic invest­ment analysis method. In PRINCE2 and MSP a non-monetary description of benefits is possible. Therefore the consideration of ecologic and espe­cially social factors is possible. Another result of a qualitative description is a better description of costs and benefits of different stakeholder. This is important because stakeholder often have non­monetary costs such as noise disturbance during construction.

The Consideration of Economic, Ecologic, Social as well as Local, Regional and Global Orientation: Traditionally costs and benefits are only economic based.

Costs and Benefits for the Investment but also for the Project Initiating the Investment: Invest­ments in contrast to project or programs are long term oriented. Thus it is not possible to differentiate the costs and benefits of an investment into short, mid and long term. But different costs and benefits during investment initiation and after investment initiation exits. Different costs and benefits during investment initiation and utilization exist such as noise disturbance of neighbors during construc­tion of a hospital. This differentiation is more important for the stakeholder perspective than the investor perspective. The costs during investment initiation represent the costs of the project and are mostly very economic driven. But for stakeholder different costs and benefits during investment initiation and after initiation exists. Knowing the stakeholder costs during investment imitation increase potentials to define measures and actions to minimize these costs.

Table 5 shows one possible way to explic­itly consider SD principles when analyzing an investment. As basis for the development of the investment analysis a stakeholder analysis needs to be done. The investor perspective can be done as a draft in internal workshops and meetings. It is suggested to do the final analysis together with important stakeholder in workshops and actively involve them in the investment decision process. This integration lays the basis for an open and transparent decision process. B ased on the identity model of organizations (Gareis/Stummer 2008) the costs and benefits of the investment are analyzed. This first step represents the investor perspective and focus on costs and benefits for the investor itself when realizing the investment. It is possible to describe the costs and benefits in a monetary or non-monetary way. Thus tangible as well as intangible costs and benefits can be considered. In a next step the cost and benefit type is selected. It is possible that one cost or benefit is a combina­tion between different types e.g. that one benefit is social as well as economic. The evaluation of the described costs and benefits can also be done in a monetary or non-monetary way. As described before, a differentiation between costs and beneftis during and after investment initiation is made.

In a next step the stakeholder perspective is analyzed. Thus the costs and benefits of important stakeholder are analyzed and evaluated. The costs and benefits can be described in a qualitative and non-monetary way and can relate to more than one type e.g. to social and economic.