Sustainable Investing Model for Decision Makers (Based On Research of Manufacturing Industry in the Czech Republic)

Abstract

Sustainable investing is an investment approach in line with the values of sustainable development and compliance with environmental, social, and corporate governance (ESG) criteria. The aim of the article is to propose a sustainable investing model (SIM) to support the decision-making of responsible individual investors. The proposed model aggregates economic indicators of investment decision-making, positive and negative ESG criteria, the market value of the stock, a systematic and unsystematic risk (expressed by the capital asset pricing model (CAPM)), thus widening the investment triangle by another peak—and that is sustainability. The research methodology is based on four key areas (environmental, social, corporate governance, and economic) associated with sustainable investments, stock market value, and risk. The research methodology of structural equation models is applied for the construction of the SIM. Mathematical equations are used to apply the SIM, which expresses values, the so-called factor scores. For the classification of sustainable investments, a classification scale is created that divides investments into three groups: above-average, average, and below-average. The SIM comprehensively evaluates individual ESG criteria and economic areas of sustainable investments, thus assisting the investor in deciding on sustainable investments of Czech joint-stock companies in the manufacturing industry, including benchmarking with other sustainable investments.

Perception of Selected Factors on the Sustainability of SMEs: Empirical Study from Visegrad Group Countries

“…Additionally, authors such as Kocmanová et al [20], Tur-Porcar et al [21], Pavláková Dočekalová et al [22], and Ahmad et al [7] declare that key performance indicators help companies achieve sustainability and prevent environmental, economic, social, and corporate governance impacts.…”

“…Key performance indicators help companies achieve sustainability and also ensure their environmental, economic, social, and Corporate Governance impacts. According to the results of several studies, e.g., Kocmanová et al [20], Tur-Porcar et al [21], Pavláková Dočekalová, Kocmanová [22], Ahmad et al [7], the following indicators can be declared: Economic performance indicators: performance indicators (return on equity, sales, assets, and invested capital), economic results (profit, turnover, added value, market share), financial indicators (total liquidity, indebtedness, asset turnover), operating cash flow. Environmental performance indicators: investments (investments in natural resource protection, costs of investments in natural resources), emissions (total air emissions, total greenhouse gas emissions), resource consumption (total annual consumption, renewable energies, materials consumed, recycled input materials, total annual water consumption), waste (total annual waste production, total annual hazardous waste production).…”

Assessment of Potential Risks of Current ESG Investment

“…Some academics are making efforts in this direction. For example, Kocmanov á et al presented the Sustainable Investing Model (SIM) model, which combines the CAPM model, ESG indicators, stock value, and other elements [13]. Although the scope of application of the abovementioned scholars' study is somewhat limited, since in their study only joint-stock companies in the Czech Republic were studied, it does represent a good start.…”

Impacts of green and preservation technology investments on a sustainable EPQ model during COVID-19 pandemic

“…Khalilpourazari and Pasandideh [23] designed emergency flood banishment strategies using robust optimization. Kocmanová et al [24] deemed that sustainable investment is an investment approach compliance with social, environmental, and corporate governance standards. Tirkolaee et al [51] developed a multi-objective optimization problem for the reliable pollution-routing problem and solved the problem using pareto-based algorithm.…”

“…Calculate the individual goals Z + 1 and Z − 2 of the objective functions Z 1 and Z 2 which are presented in Equations ( 16) and ( 17), respectively, by optimizing Z 1 and Z 2 separately along with the constraints (24) to (26). The expressions of the functions Z 1 and Z 2 are lengthy and complex.…”