Fostering green investment decisions: the real option approach

Jessica Fouilloux () and Jean-Laurent Viviani ()

Chapter 3 in Research Handbook of Investing in the Triple Bottom Line, 2018, pp 53-74 from Edward Elgar Publishing

Abstract: The chapter tries to clarify the contribution of the real option approach to green investment decisions and to show that the traditional positive relationship between uncertainty and the value of the option to wait has been questioned by recent developments in real option theory. Based on an investigation of recent developments in real option theory, the ‘wait and see’ attitude appears to be inadequate for the characteristics of green investment decisions. More realistic assumptions lead to sped-up green investments compared to the recommendation of the traditional real option models currently used in the green investment literature. If the arguments presented in this chapter convince companies to adapt their investment decision models, it could foster green investment decisions. It could also help the government to define appropriate incentives that can induce green investments. The originality of the chapter is in showing that financial theory is not necessarily an obstacle to green investment decisions.

Keywords: Business and Management; Economics and Finance; Environment (search for similar items in EconPapers)
Date: 2018
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Working Paper: Fostering green investment decisions: the real option approach (2018)
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