The process of allocating financial resources is extremely complex—both because the selection of investments depends on multiple, and interrelated, variables, and constraints that limit the eligibility domain of the solutions, and because the feasibility of projects is influenced by risk factors. In this sense, it is essential to develop economic evaluations on a probabilistic basis. Nevertheless, for the civil engineering sector, the literature emphasizes the centrality of risk management, in order to establish interventions for risk mitigation. On the other hand, few methodologies are available to systematically compare ante and post mitigation design risk, along with the verification of the economic convenience of these actions. The aim of the paper is to demonstrate how these limits can be at least partially overcome by integrating, in the traditional Cost-Benefit Analysis schemes, the As Low as Reasonably Practicable (ALARP) logic. According to it, the risk is tolerable only if it is impossible to reduce it further or if the costs to mitigate it are disproportionate to the benefits obtainable. The research outlines the phases of an innovative protocol for managing investment risks. On the basis of a case study dealing with a project for the recovery and transformation of an ancient medieval village into a widespread-hotel, the novelty of the model consists of the characterization of acceptability and tolerability thresholds of the investment risk, as well as its ability to guarantee the triangular balance between risks, costs and benefits deriving from mitigation options.

The growing environmental concerns require the characterization of decision support methods that can guide analysts towards more sustainable investment choices. Therefore, in theex-anteeconomic evaluations of investments with environmental repercussions, it is of rising interest to give the “right” value to the non-monetary effects in the long term. In this regard, conventional discounting procedures—based on constant rates—are inadequate to evaluate intergenerational environmental effects. With this research we propose an innovative model for estimating discount rates to be used in the Cost–Benefit Analysis (CBA) of projects with long-term environmental effects. The model is based on a two-goods extension of the Ramsey formula, according to which the rate at which environmental impacts are discounted is different from the rate at which monetary benefits are discounted. Compared to the Ramsey model, we propose time-declining functions of the two discount rates to assess the long-run effects of investment projects. To characterize the model, we consider the macroeconomic risk, or we assume that the variable “GDP growth rate” is a stochastic variable. Furthermore, since we propose discount rates to evaluate public projects in line with sustainable development goals, we express environmental quality as a function of the Environmental Performance Index (EPI). Based on the proposed model, we estimate for the first time declining consumption discount rates and declining environmental discount rates for Italy based on empirical data. The estimates of the two discount rates for Italy shows that the environmental discount rate is lower than the consumption one: in fact, the first one starts from a value of 3.0% and arrives at 0.4% after 300 years; while the second one starts from 0.7% and reaches 0.3% at the end of the considered time horizon. The result highlights the importance of estimating country-specific dual and declining discount rates. These discount rates allow appropriate weights to be given to all investment impacts, and therefore also to environmental impacts, compared to conventional discounting.

In the last few decades, the rapid urbanisation process has led to an exponential growth of resource use, making increasingly difficult to ensure the principles of sustainability within urban systems. Similar to living organisms, cities have always required resources and energy to survive. However, technological development and population growth have consequently led to increasing urban inflows and outflows, in so deeply altering the relations of cities with the environment as a source and a sink. Examples include the extraction of minerals for built environment and industrial processes providing manufactured goods; the conversion of fossil energy into electricity for buildings and fuel for vehicles; the use of natural resources (e.g., land or water) to support urban expansion activities. In a planet with limited resources, the challenge should not be to find new resources but to improve the way we use them and the lifestyles that they support, or in other words, to plan strategies to generate more value and higher quality of life with fewer inputs. It is well-known that cities depend on imports of external resources; however, they also benefit from internal resources and ecosystem services. Based on this framework, an urgent effort is needed to explore crucial urban issues that have not yet been adequately investigated. A strategic resource management is needed to actually move towards sustainable cities. In particular, a special focus should be placed on: (i) to monitor and properly manage the city's resources and energy systems within the metaphor of “urban metabolism;” (ii) to define innovative approaches, actions and strategies that ensure the sustainable management of non-renewable urban resources; (iii) to protect and restore urban ecosystem services as valuable renewable resources, and finally (iv) to envisage participatory governance processes for the appropriate allocation of resources to the common well-being.

Assessing the riskiness of investments in civil works is an integral part of the decision-making process. The main limitation is the absence, both in the regulatory landscape and in the literature of the sector, of threshold values that can guide the analyst in expressing an assessment on the acceptance of the investment risk. The aim of the paper is to define a risk management model that overcomes this gap by introducing acceptability and tolerability thresholds for project risk. The idea is to jointly use: (i) the As Low As Reasonably Practicable (ALARP) logic, from which the concepts threshold of acceptability and tolerability of risk derive, for the first time applied to assess the project risk in the civil field; (ii) the Capital Asset Pricing Model (CAPM) and statistical methods to define an innovative methodology for estimating the aforementioned threshold values. According to the proposed approach, these risk limit values can be specified according to both the investment sector and the socio-economic context of the project. The implementation of the methodology in the civil company sector in Europe allows to validate the described model. The elaborations show that the financial performance of the project is widely acceptable if the Expected Internal Rate of Return is greater than 7.8%; unacceptable if the expected rate of return is less than 5.6%; and tolerable as an ALARP if the expected rate is between 5.6% and 7.8%. The estimated acceptability and tolerability thresholds can provide the economic operator with a more immediate and consistent evaluation of the triangular balance of risks, costs, and benefits. This allows the decision-making process to become more rational and transparent.

For informing future energy policy decisions, it is essential to choose the correct social discount rate (SDR) for ex-ante economic evaluations. Generally, costs and benefits—both economic and environmental—are weighted through a single constant discount rate. This leads to excessive discounting of the present value of cash flows progressively more distant over time. Evaluating energy projects through constant discount rates would mean underestimating their environmental externalities. This study intends to characterize environmental–economic discounting models calibrated for energy investments, distinguishing between intra- and inter-generational projects. In both cases, the idea is to use two discounting rates: an economic rate to assess financial components and an ecological rate to weight environmental effects. For intra-generational projects, the dual discount rates are assumed to be constant over time. For inter-generational projects, the model is time-declining to give greater weight to environmental damages and benefits in the long-term. Our discounting approaches are based on Ramsey’s growth model and Gollier’s ecological discounting model; the latter is expressed as a function of an index capable of describing the performance of a country’s energy systems. With regards to the models we propose, the novelty lies in the calibration of the “environmental quality” parameter. Regarding the model for long-term projects, another innovation concerns the analysis of risk components linked to economic variables; the growth rate of consumption is modelled as a stochastic variable. The defined models were implemented to determine discount rates for both Italy and China. In both cases, the estimated discount rates are lower than those suggested by governments. This means that the use of dual discounting approaches can guide policymakers towards sustainable investment in line with UN climate neutrality objectives.