Integration of sustainable development principles and financial criteria in assessing the economic efficiency of large investment projects

Abstract

The study focuses on integrating sustainable development principles with classical financial criteria to evaluate the economic efficiency of large investment projects. The goal is to overcome the methodological gap between declarative ESG objectives and their quantitative monetization within NPV, IRR, and related metrics. The task is to build a reproducible model that translates environmental, social, and governance factors into monetary adjustments and changes the ranking of alternatives. The relevance is defined by regulatory pressure, reputational risks, and the shift of capital toward responsible investments. The novelty lies in operationalizing ESG through a system of indicators, weights, and adjustments to cash flows, compatible with financial analysis. Materials and methods include a sample of 40 projects in Russia over a decade in oil and gas, metallurgy, energy, and transportation. For each, financial data and E, S, and G indicators were collected; weights were determined using the analytic hierarchy process; indicators were normalized. An integrated ESG Adjusted NPV model was constructed: the base NPV is supplemented with monetized environmental costs and benefits, social effects, and governance risks. Multicriteria assessment, regression and correlation analysis, and rank comparisons were applied; calculations were performed in R and Python. Results show that accounting for ESG changes economic conclusions. The average adjustment modulus is 760.53 million rubles, or 24,6% of the base NPV. The rank correlation between the base and adjusted project order is 0.14, reflecting a restructuring of priorities. A negative relationship was found between IRR and the integral ESG rating (r≈-0.88) and between base NPV and the size of the adjustment (r≈-0.65). Projects with high financial indicators often lose positions after accounting for hidden environmental and social costs, while «green» initiatives improve their rankings thanks to positive adjustments. Discussion and conclusions emphasize that ESG integration does not replace financial evaluation but makes it more adequate to long-term risks and opportunities. The methodology increases the comparability of alternatives, reduces the risk of greenwashing, and supports a strategy of sustainable value. Recommendations include implementing ESG Adjusted NPV into capital budgeting regulations, standardizing indicators and weights, expanding sensitivity analysis, and conducting stress testing. Limitations are linked to the calibration of weights and data availability; prospects include longitudinal validation and industry-specific adaptations of the model.