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NEW RELEASE: Guide to Sustainable Investment Analysis

Sustainable Investment Analysis

NIST’s Applied Economic Office released a “Guide for Environmentally Sustainable Investment Analysis” based on ASTM E3200. This guide presents techniques for evaluating manufacturing investments from the perspective of environmentally sustainable manufacturing by pairing economic methods of investment analysis with environmental aspect of manufacturing, including manufacturing processes. It aids in answering questions such as:

  • A manufacturer has five proposed investments but can only afford a selection of them. Which investments should they choose when considering cost effectiveness and environmental sustainability?
  • A manufacturer is considering investing in new machinery. Is this cost effective and environmentally sustainable? Is there a tradeoff between cost effectiveness and environmental sustainability for this investment? If so, how do they decide whether to invest?

The methods are based on ASTM E3200 and, although the focus is on manufacturing, they can be applied under other circumstances (e.g., construction industry investments, agriculture, or mining). The economic techniques include net present value, internal rate of return, payback period, and hurdle rate. The guide also includes sensitivity analyses with a focus on Monte Carlo techniques. The methods presented can be used by manufacturers, regardless of size or complexity, to make environmentally sustainable decisions, including but not limited to whether to embark on an investment, discontinue a manufacturing line, and invest or re-invest in a new project or factory.

Released March 24, 2021, Updated March 29, 2022