In business terms, “normal” is understood as any gained revenue exceeding the cost and expenses needed to maintain business activity. For businesses, a normal rate of return on capital investments marks total profit gained from capital investment. For individuals, a normal rate of return stands for overall return on investment.
While a normal rate of return on capital investment embraces time and opportunity cost, the concept involves the scope of either gains or losses from an investment. Thus, the term helps to estimate the profits gained from an investment after the capital, operating costs, and investment are subtracted. In other words, investors use a normal rate of return as an indicator of investment worth in that or another business. Businesses apply a normal rate of return to assess whether certain business is profitable and calculate the rate of profitability.
According to the recent study by the Business School of the University of Edinburgh (1991-2014), the performance of 1,400 green investment funds would have been much better providing that investors would appreciate the environmental effect of fossil fuels. By contrast to black and conventional funds, the eco-friendly investments mainly inspired by ethically concerned stockholders are showing better returns on capital investment and are attracting a much wider interest from investment community compared to their conventional counterparts. These results indicate that investments in green portfolios are beyond mere ethical concerns. The investment proposition has become strategically focused on wind and solar power proving the more attractive benefit of green energy to fossil fuels. The analyzed case proves that innovative and eco-friendly projects are more appealing to investors ready to invest in more volatile small and growth stocks rather than average stocks (Medland 2015). As a result, investors associate green bond markets and green projects with the wider concept of sustainable development. In addition to being promising in terms of returns, such projects enable investors fulfill the widely acclaimed ethical principle of corporate social responsibility (CSR) (Duguid 2017).
- Duguid, Angus. “Renewable Energy: An Ethical Decision or Simple Economics,” EthiSphere, 15 Jan. 2017. Web. http://insights.ethisphere.com/renewable-energy-an-ethical-decision-or-simple-economics/
- Medland, Dina. “When ‘Ethical’ Investments Deliver Better Returns,” Forbes, 21 Sep. 2015. Web. http://www.forbes.com/sites/dinamedland/2015/09/21/when-ethical-investments-deliver-better-returns/#7a9a239733c3
