INV 06 Sustainable Investment

Sustainable Investment
WIB4, WIM4
Pedro da Silva
02.2024
1: Hickel 2020, S. 216, 2: Göppel 2022, p.99
Investment, da Silva, 02.2024 - Sustainable Investment 6-1

Investment
Course units 6. Sustainable Investment

1. Introduction  Unit Targets (3) and follow up / Literature (4)
2. Monetary  3 Requirements and 2 key principles

System  Transparency and democracy
 Approaches
3. Static Methods  Stabilizing the financial sector
 Limiting of non-performing income
4. Net Present  Creating prices that reflect total costs
Value  Rethinking taxation
 Strengthening local economies
5. Critical Review  Tools for good decision making
 Risk Matrix
6. Sustainable  Benefit Analysis
Investment  Tripple Layered Canvas
 Outlook

Unit Targets
By the end of this course unit students should be able to

 ... become active in the economy in a sustainable way
 … propose criteria with quantified rating for a benefit analysis
 … prepare, moderate and present the results of a benefit analyses

Follow up / Literature
Recommendations
 Göpel 2020, „Unsere Welt neu denken“ and
Göpel 2022, „Wir können auch anders“
 Jason Hickel 2020, „Weniger ist mehr“
 Neubauer & Repenning 2019, „Vom Ende der Klimakrise“
 https://www.worldfuturecouncil.org/de/future-policy-award/ (good laws - examples)
 www.regionalwert-treuhand.de (Citizens' Stock Corporations)
 www.finanzwende.de (Citizens' Movement for Change in Finance)
 https://web.ecogood.org/de/, https://menschlich-werte-schaffen.de/
(Economy of the common good)
 www.purppose-economy.org (new legal forms for companies)
 www.c2c-ev.de (Circular economy)
 https://transitionnetwork.org/stories/ (Success stories)
 https://www.ted.com/talks/derek_sivers_how_to_start_a_movement (on Initiative)
 https://hdr.undp.org/data-center/human-development-index#/indicies/HDI
(Human Development Index als alternative zum BIP)
 https://en.wikipedia.org/wiki/Twelve_leverage_points
(learning to look at system dynamics)

3 Requirements
Sustainability
 „meeting the needs of the present without compromising the ability of future
generations to meet their own needs “1
 Prioritizing the needs of the poor
 Preserving nature's regenerative cycles
Fairness
 Societies with unequal income distribution tend to be less happy. People living
in unequal societies tend to be more frustrated, anxious, insecure and
dissatisfied with their lives. They have higher rates of depression and addiction.2
 Inequality creates a sense of unfairness; it undermines trust. Cohesion and
solidarity in society.
Sense of purpose / Meaningfulness

 „People feel that their lives have meaning when they have the opportunity to
express compassion and to experience cooperation, community and connection
with other human beeings“3
1: Brundtland-Report 1987, S. 48, 2/3: Hickel 2020, S. 207 u. 209

3 Principles of action
Enable Regeneration
 Never take more than the ecosystems can regenerate
Implement Circularity
 Never generate more waste or pollution than ecosystems can safely absorb
Contribute to protecting the Commons

 In a system where there are goods on which everyone depends, without any
one person alone being able to produce or obtain them, a competition for who
can access them is unleashed. This will destroy them. There are three ways to
prevent this from happening
1. Education and self-restraint;
2. Sharing in such a way that the consequences of overuse are also felt by
the overusers; or
3. a common agreement on rules of use that apply to all and are enforced.
If this is done in partnership, the conservation of the goods can be placed
at the center, and everyone benefits.
Sources: Hickel 2020, S. 274, Göppel 2022, p. 274

Real transparency and direct democracy work
"αλήθεια" (pronounced "alétheia")

 Original meaning of truth = transparent
Hiden Powers
 Minority can destroy commons
Tranparent an directly democratic (see also Jason Hickel 2020, S. 274 – in Moodle)
 The majority will manage to outvote the selfish minority
and keep their destructive impulses in check

Stabilizing the financial sector
Feasible immediate implementation

 Tax financial transactions with ownership periods < 1 day
or simply prohibit same-day resale (minimum holding periods).
 Rules that prevent the write-off of debt interest
 Ban on short selling (trading in borrowed securities)
 Defense of strategical investments
Anonymous financial investors may only acquire preferred shares or shares without
voting rights (i.e. clear responsibilities, this is how China protects itself, from
influence e.g. by BlackRock)
 Compulsory disclosure of donations and benefits to political parties and politicians,
ban on corporate donations to politicians or parties.
1: Oliver Richters und Andreas Siemoneit, „Marktwirtscahft“ in Göpel 2020, S. 175

Limiting of non-performing income
Limits on private property

a. Lease payments to private parties do not finance public infrastructure.
Why do we need them in the 21 century? life landing? taxes on unused groun?
right of first refusal for municipalities at 80% local prices?
b. Not letting anyone get away behind conversely means not letting anyone move
away to far by preventing unearned value absorption.
c. There is a limit to how much responsibility a person can take on alone.
“Ownership ensures responsibility and counteracts neglecting. These functions are
correct and important. But property cannot be an absolute, because it should
primarily fulfil a social function, not an individual one: it should enable the division
of labour among strangers, not accumulation. Property must find its limit where it
restricts the freedom of others, i.e. where it leads to excessive accumulation of
power and inevitably makes it possible to reap without sowing”1.
 Limitation or at least progressive taxation of company inheritances

 Progressive taxation of assets incl. companies and real property
 One-off wealth tax for the 0.01% highest wealth
(i.e. for every 10,000th citizen)
 Adaptation of the Constitution:
private property is not worthy of protection in arbitrary amounts.
„Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohl der Allgemeinheit dienen.“
(Deutsches Grundgesetz, Art. 14)
1: Oliver Richters und Andreas Siemoneit, „Marktwirtschaft“ in Göpel 2020, S. 175

Creating prices that reflect total costs
Accounting according to more objective value-in-use concepts

 New rules e.g.
 Abolish of subsidies that promote extensive monocultures
 Introduce education vouchers
 Introduce „Earth Atmospheric Trust“ (CO2 levy finances unconditional income)
 Minimum fees for returns
Advertising bans for products that are harmful to health

 Advertising bans on alcohol, cigarettes, gambling
 Comprehensive outdoor advertising ban (e.g. in Sao Paulo, Grenoble)
 Abolition of the tax deductibility of advertising expenses
Investment, da Silva, 02.2024 - Sustainable Investment 6 - 10

Rethinking taxation
Taxation of consumption instead of taxation of production factors

 Labor is taxed up to 10 stronger than energy - why?
 Those who consume more should also pay more taxes
 Lack of money in the real economy can also be found
through targeted taxation of money in "pockets of no need"
Minimum of fairness
 In Germany anyone earning EUR 1000 net per month will pay 52% in taxes and levies
(2020), Anyone from the middle class who inherits up to one million euros will pay an
average of 10% taxes 1
 Those who inherit > 100 million euros only have to hand over half as much, according
to the statisticians' data. Two thirds of these XXL heirs, who inherited a total of 15
billion euros last year, paid nothing at all.1
 Inheritances over five million account for 0.1 percent of cases - but half of all company
assets that are transferred1
 In 2023 the Viessmann-Family paid 1,5% taxes for selling the company for
12 000 000 000 EUR2.
1:Alexander Hagelüken, 02.12.2019, https://www.sueddeutsche.de, 2: Laure Eßlinger, 09.05.2023, https://www.capital.de/

Strengthening local economies
Especially in developing countries

 Local currencies that lose value over time: keep money circulating within region:
 When weak regions import from strong regions, the imbalance increases
 Wages remain low, purchasing power too,
 capable people move away
 Loss of value by not spending is incentive to bring the money in circulation
 Independence from $
 Access restrictions for outside capital:Anonymous, outside financial investors are

only allowed to acquire preferred shares or shares without voting rights (this is how
China protects itself, from influence by BlackRock, for example).
 Banks, educational institutions, health care facilities, press and infrastructure

(e.g. water, energy): gladly in free sponsorship, non-profit, cooperatively organized
(e.g. heat supply in Denmark is "non-profit domain")

Idea: Regional currency linked to climate protection
Tom Mustermann has his

Company wants to lawn mower repaired
become climate positive
Mechanic buys
Company records and Tom Mustermann builds a local fruit
reduces its CO2 balcony PV system and
emissions receives Tecktaler for it.
Farmer buys shares in the
local energy cooperative
Company pays EUR 100
into local climate Tecktaler Energy cooperative pays dividend
fund to compensate to Iris Musterfrau
for residual
emissions Climate fund of
100 the municipality 100 Tecktaler Iris Musterfrau
EUR
pays Tecktaler to exchange Tecktaler
Tom back into EUR
95 EUR
Mustermann
5 Tecktaler … EUR leaves the

region
Basec on Gelleri 2022, p. 12

Learn to manage Risks and the Change of Priorities
Change: as seldom as possible Risk matrix

but as often as necessary ;-)
 Changes drive project members crazy
high
 needs compelling stories (plural!)
 differentiate between
project aims and priorities
use professional tools
medium
impact

 Communication effort
easy gets largely underestimated
low
Priority change matrix
low medium high
High Low probability
Value or Risk Value or Risk
Change Change
Specification
Urgent do it now follow up  Legal security: Success criteria,
Deadline
definition of done
No Deadline follow up … (defining fulfillment)
(low urgency)  Speed:
describe use cases in writing
(common understanding)

Some graphs on risk management
Basic risk ratting Risk handling - strategies
Risk rating example
Picture Source: Bosch 2012

Target-Examples for a Energy System Benefit Analysis
Criteria requiring a high number of

Exclusion criteria i.e.
assumptions, a scenario
 legislation  operation cost / net present value
(EU, country, state, county,…)  energy prices evolution
 infrastructure  governmental subsidies
(Gas grid connection?  interest rate
 inflation
 follow up invest
(i.e. replacement of batteries)
Easy to quantify criteria i.e. = f (economies of scale)
 comfort
 invest, spaced requirements Hard to quantify Targets i.e.
 independency / autarky
(share of end-energy causing operation  acceptance (connect with awareness level)
costs)  prestige / image
 climate impact (CO2eq) ,  innovation
pollution (SO2äq, Well to Wheel?)
 flexibility
 technology ripeness
(market share > x%)  complexity
 reliability of supply (redundancy)  risks

Weighting - traceability by using preference matrix
Procedure See also Wikipedia

1. Collect criteria and write them in rows and  Einflussmatrix
columns of the matrix (https://de.wikipedia.org/wiki/Einflussmatrix)
2. Carry out pairwise comparison

3. Determine number of mentions and
weighting
Beispiel – siehe Vorlage in Moodle

© Copyright by MeineVorlagen – www.MeineVorlagen.com - Alle Rechte vorbehalten
Kriterium Nr. 1 2 3 4 5 6 7 8 9 10 Punkte Gewichtung

Kriterium 1 1 1 3 4 5 6 1 8 1 1 4 8,9
Kriterium 2 2 3 4 5 2 2 8 2 2 4 8,9
Kriterium 3 3 3 3 3 3 8 9 3 7 15,6
Kriterium 4 4 4 4 4 8 9 4 6 13,3
Kriterium 5 5 5 5 8 5 5 6 13,3
Kriterium 6 6 7 8 9 10 1 2,2
Kriterium 7 7 8 7 7 3 6,7
Kriterium 8 8 8 8 9 20,0
Kriterium 9 9 10 3 6,7
Kriterium 10 10 2 4,4
Total 100,0
Möchtest du die Vollversion mit allen Rechten am Dokument? Dann gehe auf www.MeineVorlagen.com/Shop und erwerbe für wenige Euro die Vollversion. (SI-1001)

Different meanings of “Cost optimization”
Common Targets / Boundary conditions
1. Minimize Invest complying with present legislation
2. Minimize Invest complying with “Leed Gold” certification
3. Minimize operation cost by using fix available Budget
4. Optimize total cost of ownership for the first 7 years of operation

assuming i.e.
• 15 a for building services
• 40 a for construction
• 2% rate of price increase, 1% capital costs
5. Optimize total cost of ownership,

assuming i.e.
• 20 a for building services
• 40 a for construction
• 1,5% rate of price increase, 3% capital costs

Absolute versus relative rating
Symbol Meaning rating Invest (I) – example 1 Rating
f rate of fulfilment absolute rating
- clearly described rating (quantification)
- strong deviations
I = lowest value (lv) 5
w weighting factors lv < I ≤ 1,1• lv 4

(sum = 1)
1,1 • lv < I ≤ 1,2 • lv 3
B Benefit of each alternative
B=f•w 1,2 • lv < I ≤ 1,3 • lv 2
1,3 • lv < I ≤ 1,4 • lv 1
 absolute rating 1,5 • lv < I 0
 maximum transparency
 clear results will require rating Invest (I) – example 2 Rating
clear weighting Sequence rating
 relative rating I = lowest value 5
 causes stronger
deviations in benefit second lowest value 4
 includes implicit weighting third lowest value 3
forth lowest value 2
fifth lowest value 1
all others 0
Quelle: Krimmling 2014, S.96

Rate of fulfillment – further examples
Quality of available Information Rating Technology ripeness Rating
Detailed professional analysis of energy 5 Market share ≥ 15% 5

needs and value chain
Products available, 4
Detailed analysis of energy needs in 4 market share < 15%
collaboration with internal know-how
> 25 units being tested 3
Data raised after consultation with 3 on the field since > 1a
internal know-how
Units being tested on the field 2
Structured data 2
Demonstrated in laboratory 1
No structure in collected data 1
Plausible idea, first patents 0
Legislation risks Rating Innovation Rating
No existing legislation restrictions, risks 5 Up to data only used in field tests 5

are evaluated, no critical impact known
used in other markets 4
No existing legislation, no risk evaluation 4
established in other markets (>15%) 3
No existing legislation, discussion on 3
introducing it ongoing
used by direct competitors 2
No discussion on tightening 2
used within company 1
of existing legislation
Discussed tightening of existing 1
legislation could force retrofit
Based on Bosch-Experience

The Preparation of a Benefit Analysis
Load profile: how much of what and when is exacltly needed

 Electricity or heat?
 heat at different levels of temperature?
 Air conditioning?
Locally available resources

 PV? Pellets? Biogas? geothermal? environmental heat (air, water)? small wind?
district heating? “green” electricity? Combined heat and power?
 generally meaningful combinations, e.g.
combined heat and power + heat pump or PV + air conditioning
Options for energy storage and load shifting

 water tanks? fuel tanks? batteries?
 thermal active building?
 flexibility of loads?
Understand involved expectations (understand ≠ adapt)

 who is paying? → should be involved in rating of fulfillment and weightning
 who will be “asked for an opinion”?

Good practices
Quality of results depends mainly on Safe effort and time

 among each other as independent as possible  be consequent
and clearly defined criteria with knock-out criteria
 documentation of assumptions made  between 3 and 7 direct participants
 stringent, understandable, verifiable and
precise defined ratings for fulfillment
Process summary
1. determine knock-out criteria, sample further potential evaluation criteria
2. sample and deploy alternatives, document with “case stories”
3. eliminate alternatives not fulfilling one of the knock-out criteria
4. chose and define 5 to 12 key criteria, determine rating of fulfillment
5. calculate benefits
6. if deviation between benefits is less significant, check sensitivity to
variations of weighting and rating of fulfillment
7. Illustrate results

And remember you will need assumptions about the future
Scenario thinking is the opposite of extrapolation

 Which parameters have impact?
 Which of those are changing very fast?
(or could change very fast?)
 Scenario = set of plausible among each other consistent developments
Scenario thinking
Plausible
wild card developments  plausible ≠ expected
 What would need to happen so that …
available what are the consequences of …
data,
relevant  „wild card“ = discontinuity
changes
so far • not likely to happen
• great impact
past present future

Picture source: https://de.wikipedia.org/wiki/Szenariotechnik
also relevant: https://en.wikipedia.org/wiki/Twelve_leverage_points

Tripple Layered Canvas
Economic Partners Activities Value Customer Customer
layer Proposition Relationship Segments
Resources Channels
Costs Revenues
Suppliers Production Functional End-of-life Use Phase

Values
Environmental
layer
Materials Distribution
Environmental Impact Environmental Benefits
Local Governance Social Societal End User

Communities Value Culture
Social
layer
Employees Scale of
Outreach
Social Impacts Social Benefits
Quelle: Bosch 2021, https://www.existenzgruender.de/, Siehe auch https://www.ecogood.org/start-ups/ und in Moodle-Literatur Joyce 2016

Outlook
Why us?
 "If Germany can do it, others can do it too. If Germany fails, the chances are bad for
everyone.“1
Change of perspective?
 From the product to the process
 from the conveyor belt to the cycle,
 From extraction to regeneration
 From competition to collaboration
 From money to value
„ It's not your fault that the world is the way it is ...
 but it's your fault if it stays there: „Be the change you wish to see in the world.2, e.g.
 Your Investment - what does it finance?
 Consumption - what does it promote?
 3,5%, 10%, 2%?
 „Humour over rumor“
1: Johan Rockström in Neubauer 2019, p. 195, 2: Mahatma Gandhi

Reflection / Self-Test
 What does sustainable mean?

 Explain two approaches each to
 Stabilization of the financial world
 Limitation of unearned income
 Creating prices that reflect total costs
 Strengthening local economies
 Who should implement change?
 When is it worth spending the effort for a benefit analysis?
 What is a scenario?
Why does the rating of some criteria require thinking in scenarios?
 Name 5 important, but hard to quantify decision criteria for a benefit analysis
 What is the difference between absolute and relative rating of criteria?
Which type forces stronger deviations between alternatives?
 The next time you are responsible for preparation of a benefit analysis:
what will your focus be?
 What is the difference between canvas and tripple layered canvas?


INV 06 Sustainable Investment

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Sustainable Investment

1: Hickel 2020, S. 216, 2: Göppel 2022, p.99

Investment, da Silva, 02.2024 - Sustainable Investment 6-1

Course units 6. Sustainable Investment

2. Monetary  3 Requirements and 2 key principles

Investment, da Silva, 02.2024 - Sustainable Investment 6-2

By the end of this course unit students should be able to

Investment, da Silva, 02.2024 - Sustainable Investment 6-3

Investment, da Silva, 02.2024 - Sustainable Investment 6-4

Sense of purpose / Meaningfulness

1: Brundtland-Report 1987, S. 48, 2/3: Hickel 2020, S. 207 u. 209

Investment, da Silva, 02.2024 - Sustainable Investment 6-5

Contribute to protecting the Commons

Sources: Hickel 2020, S. 274, Göppel 2022, p. 274

Investment, da Silva, 02.2024 - Sustainable Investment 6-6

"αλήθεια" (pronounced "alétheia")

Investment, da Silva, 02.2024 - Sustainable Investment 6-7

Feasible immediate implementation

1: Oliver Richters und Andreas Siemoneit, „Marktwirtscahft“ in Göpel 2020, S. 175

Investment, da Silva, 02.2024 - Sustainable Investment 6-8

Limits on private property

 Limitation or at least progressive taxation of company inheritances

Investment, da Silva, 02.2024 - Sustainable Investment 6-9

Accounting according to more objective value-in-use concepts

Advertising bans for products that are harmful to health

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 10

Taxation of consumption instead of taxation of production factors

1:Alexander Hagelüken, 02.12.2019, https://www.sueddeutsche.de, 2: Laure Eßlinger, 09.05.2023, https://www.capital.de/

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 11

Especially in developing countries

 Access restrictions for outside capital:Anonymous, outside financial investors are

 Banks, educational institutions, health care facilities, press and infrastructure

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 12

Tom Mustermann has his

5 Tecktaler … EUR leaves the

Basec on Gelleri 2022, p. 12

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 13

Change: as seldom as possible Risk matrix

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 14

Risk rating example

Picture Source: Bosch 2012

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 15

Criteria requiring a high number of

 infrastructure  governmental subsidies

(Gas grid connection?  interest rate

 reliability of supply (redundancy)  risks

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 16

Procedure See also Wikipedia

2. Carry out pairwise comparison

Beispiel – siehe Vorlage in Moodle

Kriterium Nr. 1 2 3 4 5 6 7 8 9 10 Punkte Gewichtung

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 17

Common Targets / Boundary conditions

1. Minimize Invest complying with present legislation

2. Minimize Invest complying with “Leed Gold” certification

3. Minimize operation cost by using fix available Budget

4. Optimize total cost of ownership for the first 7 years of operation

5. Optimize total cost of ownership,

Investment, da Silva, 02.2024 - Sustainable Investment 6 - 18

w weighting factors lv < I ≤ 1,1• lv 4

1,3 • lv < I ≤ 1,4 • lv 1

 absolute rating 1,5 • lv < I 0

 includes implicit weighting third lowest value 3