Decreasing investment model for sustainability

Abstract: The purpose of this work is to point out an investment model which belongs to the world of credit but for sure it would be useful in many others subjects thanks to its aim. It aims to economic, social and enviromental sustainability which is becoming increasingly important even in the world of finance. This model considers the investments, not only economically, but also in enviromental, social and governance terms, to obtain more and more Substainable and Responsible Investments. To underline the importance of what it’s written before, it’s useful to focus on the significant worldwide growth of sustainable finance thanks to the European (also Italian) support. It happens through several financial instruments like ESG, Green Bond, Social Bond, Private Equity, Private Debt and more. The targets of the instrument under study are fami-lies and companies willing to make a medium-long term investment.The investment has to aim to the achievement of one of the 17’s 2030 ONU’s schedule goals.The model being studied is based on the decrease in the cost of the resources use, depending on the sustainability of the in-vestment to which the loan is aimed. A spread α is added to the IRS in force at the time of the investment, which will be made to decrease, periodically, throughout the life of the debt repay-ment, even for negative values. Consequently, the reprogramming of the installment and the re-lated amortization plan will be carried out based on the variation of α. Various functions, specif-ically examinated, will deal with weighing some factors deemed influential for the impact that the investment provides on environmental, social and economic sustainability. The factors con-sidered to obtain the level of decrease in the spread, through the specific functions, are the amount financed, the life to maturity of the loan and the degree of sustainability of the invest-ment. The decreasing investment model for sustainability (DIMS) shows a single drawback for the debtor because of the decreasing installment which will initially be of a high amount. This inconvenience is only apparent as the overall cost of debt due to the decrease in the spread be-comes more convenient as the life to maturity increases. This model makes the relationship be-tween debtor and creditor more stable, and it provides the creditor with the opportunity for a more substantial reinvestment with possible repricing advantages. These are just a few ad-vantages and certainly of lesser importance than the attention that DIMS places on a better world.