Original Post by Joshua Florentino:
Although all the concepts covered in this course are useful, the finance portion was the most enlightening and useful. In particular capital budgeting is extremely useful to understand how to assess health of the organization and how to identify which projects could be the best. Also, sensitivity analysis can be very useful to assess how much risk to take (Ross, Westerfield, and Jordan 2015).
These concepts from finance will be useful in my career. I would like to work for a nonprofit or perhaps the government and atleast understanding budgeting and sensitivity analysis can add value to making informed financial decisions. And even if one is not solely making decisions these concepts can help in providing sound advice to those who make financial decisions. Although, it is hard to predict with precision where or when I will be using this knowledge specifically since I am currently a full time student.
Knowledge on how to interpret financial information can be useful in any organization in any field. However, applying economic and finance principles such as capital budgeting and project analysis can be applied to environmental projects to determine a thorough cost-benefit analysis and achieve a balance between economic growth and mitigating environmental costs. Additionally, being well informed on green bonds, green lending, and other such initiatives will be very useful in environmental management.
Ross, Stephen A., Randolph W. Westerfield, and Bradford D. Jordan. 2015. Fundamentals of Corporate Finance: Standard Edition. 11th ed. New York: McGraw Hill/Irwin.
I agree- the financing portion of the course is useful! Examining a company’s budgeting is a wonderful way to understand its values. It was a phenomenal experience reading so many annual reports of banks and other organizations. After taking a look at multiple annual reports side by side, I learned from the course it is beneficial to examine the types of projects they are funding and search for results-oriented information. It is a relief to understand how to identify greenwashing. Also, I prefer examining risk in terms of numerical analysis instead of instinct. The course provided the tools to calculate risk.
Phrasing the organization’s success with the word “health” is interesting, as well. In my eyes, in order to have quality health, a requirement is for the organization to be growing in sustainability. In other words, the organization needs to have a bright future. I can see the desire to be a healthy organization equipped for the changing times as a priority corporations are going to adopt going forward. In order to be a healthy organization, a business needs to be clear about its values, not only from a morality standpoint, but also understand why it is spending money in certain areas and verify there is not a waste of resources due to inefficient processes. I agree knowledge on how to interpret financial information can be useful in any organization in any field. Environmental economics is an amazing approach to clarifying health.
Comment by Professor Thomas:
Yes, “Health” is an ambiguous and innocuous-sounding word that lacks precise definition. It’s very useful to politicians in that regard. And who would be against Health – economic health, environmental health, the health of our education system…? It is the sort of word used to co-opt our agreement without the bother of being precise or endangering the outcome by defining terms.
Can we think of better terms to use in this context?
Good point about “health” being vague and resulting in essential agreement. It is crucial to replace “health” with a measurable term since “health” is not directly quantifiable, similar to a person’s value of clean air. Both, health and clean air, do not automatically have a numerical value. Further, defining “health” is similar to defining “efficiency” in regards to there needing to be a specificity involved.
For example, in the case a company is being cost-efficient in terms of minimizing costs to maximize profits, it is not necessarily making a sound choice to support the environment. However, the company is still being healthy in terms of maximizing profit. On the other hand, if health is only measuring environmental wellness, a company going into debt to support the earth is healthy even though it is not financially secure. Does health refer to how secure an organization is in regards to its monetary capital? In the case a company cannot financially support itself, it can no longer substantially support the environment. Or, does health refer to a company’s ability to simultaneously save money and support the environment? The questions guide a company to define health as a balance between monetary wealth and positive social/ethical contribution. For instance, a company may be healthier compared to its industry rival because it is more efficient in terms of funding environmental clean-ups at an insignificant cost relative to the company’s total profits.
Moreover, clear values are reflected by a company’s investment into certain projects. However, does health refer to the degree to which a company is equipped to follow through with a given project? Or, is health entirely based upon a company’s completed projects? In addition, the better terms would need to encompass a balance in terms of discounting the future. It needs to be both stable now and have a bright future.
We can adopt the word “sustainability”. However, the word by itself is not measurable which can lead to greenwashing.
Therefore, instead of providing a better word, I would rather just use “health,” equating to success. “Health” can be used to indicate the degree to which a company scores high in a specified category. Health itself is not a category.