{"id":21814,"date":"2026-10-03T13:49:36","date_gmt":"2026-10-03T11:49:36","guid":{"rendered":"https:\/\/cmi.es\/publicacion\/sustainability-investment-selection\/"},"modified":"2026-10-03T13:51:27","modified_gmt":"2026-10-03T11:51:27","slug":"sustainability-investment-selection","status":"publish","type":"publicacion","link":"https:\/\/cmi.es\/en\/publicacion\/sustainability-investment-selection\/","title":{"rendered":"Why sustainability matters when selecting investments"},"content":{"rendered":"

Ignacio Paja Fano<\/a> \/ Lecturer at CMI Higher Education<\/a><\/p>\n

For many years, the investment decisions made by companies and individuals have been the engine of growth in market economies in every free country. The criteria for selecting new investments have become more sophisticated over time, and sustainability has become a key factor to take into account, for the reasons we analyse below.<\/p>\n

Historically, the methods used to analyse investments in private enterprise have gone through three distinct stages:<\/p>\n

1. The intuitive method<\/h2>\n

This way of choosing investments could be described in many ways. It relies on “having a good nose” or on listening to the opinion of an expert, or simply of an acquaintance, who tells us where to invest. It is quite common among individuals and it is the least scientific method, although small or family businesses may still take investment decisions this way.<\/p>\n

There is no profitability analysis, no serious market research and no detailed study of the competition or of the investment’s future returns. Nor is there any analysis of the investment’s sustainability or of its environmental, social or any other impact on the community of stakeholders around the company.<\/p>\n

2. The scientific method<\/h2>\n

Here the aim is to choose the most suitable investments, but only after a series of preliminary studies that make it possible to focus on the most attractive ones.<\/p>\n

Several factors are analysed in depth, such as market trends, financial performance, industry prospects and the competitive landscape. For companies, this analysis becomes a financial model that compares the initial amount invested with the annual cash flow it generates. The return obtained is compared with the cost of equity or of the external financing used to pay for the investment, and the decision on whether to go ahead is taken accordingly. The most widely used techniques are net present value (NPV), internal rate of return (IRR) and the payback period.<\/p>\n

A key part of this method is assessing the level of risk, whether the investment is personal or corporate. High-risk investments usually offer the chance of higher returns, though these may not materialise. Lower-risk, more diversified investments yield less but reduce the risk.<\/p>\n

In this kind of analysis, sustainability factors are given minimal weight or practically none: the selection criterion is the highest financial value, once the market, the competitors and so on have been analysed.<\/p>\n

3. Investments based on sustainability criteria<\/h2>\n

This method does not cancel out the previous two, but it adds new aspects that are decisive when choosing between one investment and another.<\/p>\n

Comparison table: traditional project versus sustainable project<\/h3>\n
\n\n\n\n\n\n\n\n
Dimension<\/th>\nTraditional project approach<\/th>\nSustainable project approach<\/th>\n<\/tr>\n<\/thead>\n
Environmental<\/strong><\/td>\nMinimum regulatory compliance. Sees the environment as a source of resources to exploit.<\/td>\nSeeks a positive impact. Prioritises investment in conservation, restoration and renewable energy.<\/td>\n<\/tr>\n
Social<\/strong><\/td>\nSocial impacts are seen as externalities to be managed or offset. The focus is on the jobs the investment creates, without prioritising their quality.<\/td>\nThe community is seen as a key partner. The focus is on local development, decent work and a better quality of life.<\/td>\n<\/tr>\n
Economic \/ Governance<\/strong><\/td>\nMaximising short-term returns for shareholders. Environmental and social costs are not internalised.<\/td>\nLong-term value creation for all stakeholders. Efficient use of resources and innovation generate lasting returns.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

Including sustainability in investment analysis is an unstoppable trend, and European regulation confirms it. The Corporate Sustainability Reporting Directive (CSRD) requires large companies to report in detail on every ESG (environmental, social and governance) issue. In addition, the Sustainable Finance Disclosure Regulation (SFDR) requires financial institutions to classify their investment products according to ESG criteria.<\/p>\n

In short, selecting corporate or personal investments now calls for a detailed study of every ESG issue as well as financial analysis, and meeting those criteria strengthens long-term returns.<\/p>\n

About the author<\/h2>\n

Ignacio Paja Fano<\/strong> lectures at CMI Higher Education on the MBA, Sustainable Finance and Responsible Marketing and International Trade programmes. Over a 40-year career he has held senior management positions in Spanish and multinational industrial companies, mainly in the food and paper sectors, with proven experience in finance, sales, procurement and logistics. He holds a degree in Economics and Business from the University of Deusto and has completed the Master’s in Financial Management and Control (IE), the PADE Senior Management Programme (IESE) and the Master’s in Human Resources Management (EAE). View his profile<\/a>.<\/p>\n

\ud83d\udc49 Discover the Master’s in Sustainable Finance Management<\/a><\/p>\n","protected":false},"featured_media":21813,"template":"","meta":{"_acf_changed":false},"categorias-publicacion":[108,204],"class_list":["post-21814","publicacion","type-publicacion","status-publish","has-post-thumbnail","hentry","categorias-publicacion-publications","categorias-publicacion-csr-and-sustainability"],"acf":[],"_links":{"self":[{"href":"https:\/\/cmi.es\/en\/wp-json\/wp\/v2\/publicacion\/21814","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cmi.es\/en\/wp-json\/wp\/v2\/publicacion"}],"about":[{"href":"https:\/\/cmi.es\/en\/wp-json\/wp\/v2\/types\/publicacion"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cmi.es\/en\/wp-json\/wp\/v2\/media\/21813"}],"wp:attachment":[{"href":"https:\/\/cmi.es\/en\/wp-json\/wp\/v2\/media?parent=21814"}],"wp:term":[{"taxonomy":"categorias-publicacion","embeddable":true,"href":"https:\/\/cmi.es\/en\/wp-json\/wp\/v2\/categorias-publicacion?post=21814"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}