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Sustainability Discount Rates

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Sustainability Valuation of Business

Part of the book series: SpringerBriefs in Finance ((BRIEFSFINANCE))

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Abstract

This chapter discusses capital that produces sustainability and how to find the rates to discount future sustainability cashflows of business. With sustainability cashflows, the return-risk profile of business would change, which would eventually modify the capital structure of the business and consequently its discount rates. It maintains the view that the discount rates are market-driven, and the transition to new discount rates will be slow and gradual.

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Notes

  1. 1.

    Appendix F illustrates how greatly perception of future risk may modify the discount rates.

  2. 2.

    The Stern report (2007) uses a low 0.1%. Most others and Nordhaus (1994) use rates close to market rates that are higher.

Cited Works

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Further Readings

  • Arrow, K. (1959). Towards a theory of price adjustment. In M. Abramovitz (Ed.), Allocation of economic resources: Essays in Hornor of Bernard Francis Haley (pp. 41–51). Stanford: Stanford University Press.

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  • Arrow, K. J., Cropper, M., Gollier, C., Groom, B., Heal, G., Newell, R., … Weitzman, M. (2012). How should benefits and costs be discounted in an intergenerational context? The views of an expert panel. RFF Discussion Paper, 12(53).

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  • Figge, F., & Hahn, T. (2005). The cost of sustainability capital and the creation of sustainable value by companies. Journal of Industrial Ecology, 9(4), 47–58.

    Article  Google Scholar 

  • Garnaut, R. (2008). The garnaut climate change review. Melbourne: The Cambridge University Press.

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Authors and Affiliations

  1. University of Antwerp, Antwerpen, Belgium

    Yonghyup Oh

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  1. Yonghyup Oh
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Correspondence to Yonghyup Oh .

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© 2019 The Author(s), under exclusive license to Springer Nature Switzerland AG

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Oh, Y. (2019). Sustainability Discount Rates. In: Sustainability Valuation of Business. SpringerBriefs in Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-18648-7_4

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