ESG Integration in Capital Investment Decisions

Abstract

This thesis investigates how environmental, social and governance (ESG) considerations are integrated into capital investment decision-making processes in an unlisted, family-owned company operating in the Finnish mechanical forest industry. ESG has gained increasing relevance in strategic management and financing, yet its role in internal investment decisions remains unclear, particularly in firms without formal sustainability systems.

The study draws on sustainability management accounting (SMA) and management control systems (MCS) frameworks to explore how ESG factors are assessed, accounted for and used in investment decision-making. The research is conducted as a qualitative single-case study based on an in-depth interview with the company's Chief Financial and Administrative Officer.

The findings indicate that ESG considerations are integrated informally through exclusionary screening in early-stage planning, through operational data that influences financial models and through internal value systems that guide decision-making. While no formal ESG metrics or investment frameworks are in use, sustainability considerations are incorporated via tacit processes, cross-organizational dialogue and belief- and boundary-based control mechanisms.

The study contributes to the literature on SMA and MCS by showing how ESG can be substantively incorporated into investment decisions without formal technical systems, particularly in value-driven, unlisted companies.