Financial Aspects of Environmental Management 1400-ZS-FINASZS-z
1. Financial indicators and “eco-indicators”. Connections between environmental effects and the financial analysis. Cash flow evaluation of environmental benefits. Potential conflicts.
2. Valuation of the financial effects of economic decisions. Valuation of cash flows. Methods for evaluating investments - valuation of the net present value and internal rate of return. Financial evaluation of a non-profit investments.
3. Project risk analysis. Analysis of environmental risk factors. Cash flow valuation of environmental threats to the functioning of the project.
4. Cost of capital - cost of equity, cost of debt, cost of capital raised from public funds. Cost of capital valuation for ventures with consequences for the environment financed from the public funds.
5. Valuation of the contingent liabilities related to the use of the environment. Environmental due diligence.
Type of course
Prerequisites (description)
Learning outcomes
Upon the completion of the course, student:
• is able to analyze and describe ventures with consequences for the environment in cash terms,
• identifies relevant cash flows that are the effect of economic actions,
• is able to analyze the relationship between the environmental and financial effects of the project,
• is able to analyze and choose the optimal solutions from the financial and environmental point of view for the ventures with consequences for the environment
• is able to analyze and value the external financial needs to finance particular ventures with consequences for the environment
• is able to analyze and choose the optimal financial source for ventures with consequences for the environment
• explains the relationship between consequences of ecological and financial decisions
• can identify and estimate the value of rights to use the components of the environment.
• can identify and assess the consequences of use of the environment for future contingent financial liabilities
Assessment criteria
Written exam, team project work, written assignments . The grade composition is as follows:
• Team project - 20%
• Class participation - 10%
• Final examination - 70%
Bibliography
Basic literature:
• Brigham E.F., Ehrhardt M.C., Financial Management: Theory and practice, 16th edition, Thompson – South-Western, Mason 2019 (or earlier edition).
Recommended literature:
• Labatt S., White R.R. Environmental finance: a guide to environmental risk assessment and financial products, John Wiley and Sons, 2002.
• White M.A. Environmental Finance: Value and Risk in an Age of Ecology ”Business Strategy and The Environment”, Vol. 5, 198-206 (1996).
• Handbook for Appraisal of Environmental Projects Financed from Public Funds, Organisation for Economic Co-operation and Development, 2007.
• Douglas W., Lipton D.W., Wellman K., Economic Valuation of Natural Resources, U.S. Department of Commerce, National Oceanic and Atmospheric Administration, June 1995.
• Valuing nature conservation. A methodology for quantifying the benefits of protecting the planet’s natural capital, McKinsey & Company Report, September 22, 2020.
• Bolton P. (et al.), The green swan. Central banking and financial stability in the age of climate change, Bank for International Settlements, January 2020.
• Selected articles from McKinsey on Finance, and The Economist.