Making Capital Investment Decisions Essay

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In the modern business context, investment and long-term planning are rightfully perceived as key to the company’s success. Indeed, a profitable allocation of the enterprise’s finance may either double or negatively affect its assets. The process of meticulous planning of the investment allocation and potential outcomes is known as a capital investment decision. If previously, this process could be focused solely on the concept of profitability and the benefit a company can receive from capital asset procurement, today’s capital investment decisions are rather focused on the notion of Corporate Social Responsibility (CSR) and such social phenomena as sustainability and environmental safety. Thus, in a recent article by The Wall Street Journal (2021), the concept of investing based on environmental, social, and governance factors (ESG) is addressed as one of the most relevant spheres of capital investment decisions in the market. Thus, according to the article, over the past years, there has been a shift from conventional investment to an ESG model of sustainable and responsible capital allocation and procurement. However, after discussing this trend with the experts, it has become evident that currently, the tendency of sustainability is widely used as a strategy to seem more appealing to investors. As a result, a company that prides itself in sustainable practices is more likely to receive capital from the investors, so many companies create faux sustainability initiatives and “greenwash” the investors’ money. In order to avoid these traps, the company’s capital investment decisions should be made based on real data and socially responsible initiatives. In such a way, these investments are likely to initiate sustainable changes in the environment, leading to beneficial long-term outcomes for businesses.

Reference

The Wall Street Journal. (2021). Where will ESG investing be in five years? Web.

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IvyPanda. 2022. "Making Capital Investment Decisions." December 14, 2022. https://ivypanda.com/essays/making-capital-investment-decisions/.

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