PSI - Issue 64

ScienceDirect Structural Integrity Procedia 00 (2023) 000 – 000 Structural Integrity Procedia 00 (2023) 000 – 000 Available online at www.sciencedirect.com Available online at www.sciencedirect.com ScienceDirect Available online at www.sciencedirect.com ScienceDirect Procedia Structural Integrity 64 (2024) 1767–1773

www.elsevier.com/locate/procedia

www.elsevier.com/locate/procedia

SMAR 2024 – 7th International Conference on Smart Monitoring, Assessment and Rehabilitation of Civil Structures SMAR 2024 – 7th International Conference on Smart Monitoring, Assessment and Rehabilitation of Civil Structures Building upcycling vs. building reconstruction investment decisions: a focus on the discount rate Building upcycling vs. building reconstruction investment decisions: a focus on the discount rate

Elena Fregonara a, *, Diego G. Ferrando b a Politecnico di Torino, Architecture and Design Department, Viale Mattioli 39, Turin 10139, Italy b Politecnico di Torino, Architecture and Design Department, Viale Mattioli 39, Turin 10139, Italy Elena Fregonara a, *, Diego G. Ferrando b a Politecnico di Torino, Architecture and Design Department, Viale Mattioli 39, Turin 10139, Italy b Politecnico di Torino, Architecture and Design Department, Viale Mattioli 39, Turin 10139, Italy

2452-3216 © 2024 The Authors. Published by ELSEVIER B.V. This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0) Peer-review under responsibility of SMAR 2024 Organizers 10.1016/j.prostr.2024.09.182 2452-3216 © 2024 The Authors. Published by ELSEVIER B.V. This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0) Peer-review under responsibility of SMAR 2024 Organizers 2452-3216 © 2024 The Authors. Published by ELSEVIER B.V. This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0) Peer-review under responsibility of SMAR 2024 Organizers Abstract This work continues the methodological exploration illustrated in a correlated contribution presented by the Authors to this Symposium. In this advancement, the focus is on selecting the appropriate discount rate for the NPV calculation, evaluating alternative scenarios in the building construction sector. Assuming the presence of environmental and financial input variables in the DCF model, a “time preference” discount rate seems inappropriate. Thus , as an alternative, the environmental hurdle rate technique is explored. This is based on using different rates considering the negative contribution to the environment due to an input variable or, conversely, considering the technological development expectations toward energy consumption and CO 2 emissions reduction over time. Simulations on two alternative scenarios are implemented: the retrofit scenario and the demolition and reconstruction scenario of an existing residential building. The results confirm the importance of the discount rate capability in influencing the DCF model output, even more in the presence of environmental input, highlighting their weight on increasing the asset residual value. Further, the environmental hurdle rate can perturb the final scenario ranking toward environmentally responsible investment decisions at different scales. Abstract This work continues the methodological exploration illustrated in a correlated contribution presented by the Authors to this Symposium. In this advancement, the focus is on selecting the appropriate discount rate for the NPV calculation, evaluating alternative scenarios in the building construction sector. Assuming the presence of environmental and financial input variables in the DCF model, a “time preference” discount rate seems inappropriate. Thus , as an alternative, the environmental hurdle rate technique is explored. This is based on using different rates considering the negative contribution to the environment due to an input variable or, conversely, considering the technological development expectations toward energy consumption and CO 2 emissions reduction over time. Simulations on two alternative scenarios are implemented: the retrofit scenario and the demolition and reconstruction scenario of an existing residential building. The results confirm the importance of the discount rate capability in influencing the DCF model output, even more in the presence of environmental input, highlighting their weight on increasing the asset residual value. Further, the environmental hurdle rate can perturb the final scenario ranking toward environmentally responsible investment decisions at different scales. © 2024 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0) Peer-review under responsibility of SMAR 2024 Organizers * Corresponding author. Tel.: +0039 011 0906432. E-mail address: elena.fregonara@polito.it * Corresponding author. Tel.: +0039 011 0906432. E-mail address: elena.fregonara@polito.it