Investment appraisal and financial benefits of corporate green buildings: a developing economy case study

Abstract

Purpose

This case study aims to appraise the financial benefits of green building construction in developing countries. The case study presents, green building's positive net present value (NPV) investment in real terms and potentially enhanced stock market returns at the firm level compared to competitors.

Design/methodology/approach

The case study examines secondary data on a green building certification and longitudinal operation costs to estimate green building investments' financial benefits. The case study also compares the stock market performance of green building portfolio company with non-green building competitors of similar size and industry.

Findings

The case study finds out that the real return rate on green building investment is higher than the weighted average cost of capital (WACC) of the company with an inflation-adjusted payback period of fewer than ten years. Findings compare favourably to the extant literature which was mostly in developed economies. The paper further highlights that stock market performance for a green building focused company shows improved returns to shareholders relative to non-green competitors.

Research limitations/implications

The results are specific to the time and building researched; green buildings costs have reduced over time, and a new study may show improved case study findings. The case study results on stock market performance are indicative and may need further research for evaluation.

Practical implications

The case study presents a model for critical appraisal of green buildings investment. The paper further indicates that green building investment may lead to operational savings and superior stock performance compared to competitors.

Originality/value

The paper presents a green building investment appraisal model which might be useful for the industry and academia. Developing countries have limited literature on green buildings' financial benefits; this case study quantifies the financial benefits and compares them with the available literature related to developed economies’ green buildings.

Citation

Verma, S., Mandal, S.N., Robinson, S., Bajaj, D. and Saxena, A. (2021), "Investment appraisal and financial benefits of corporate green buildings: a developing economy case study", Built Environment Project and Asset Management, Vol. 11 No. 2, pp. 392-408. https://doi.org/10.1108/BEPAM-06-2020-0108