What is 'Brown Field Investment'

Brown field investment, also referred to as "brownfield" is when a company or government entity purchases or leases existing production facilities to launch a new production activity. This is one strategy used in foreign-direct investment. The alternative to this is a green field investment, in which a new plant is constructed.

BREAKING DOWN 'Brown Field Investment'

Brown field investing covers both the purchase and the lease of existing facilities. At times, this approach may be preferable, as the structure already stands. Not only can it result in cost savings for the investing business, but it can also avoid certain steps that are required to build new facilities on empty lots, such as building permits and connecting utilities.

The term brown field refers to the fact that the land itself may be contaminated by the prior activities that have taken place on the site, a side effect of which may be the lack of vegetation on the property. When a property owner has no intention of allowing further use of vacant brown field property, it is referred to as a mothballed brownfield. Sites that are significantly contaminated, such as by hazardous waste, are not considered to be brown field properties.

Brown Field Investment and Foreign Direct Investment

Brown field investing is common when a company looks toward a foreign-direct investment option. Often, a company considers facilities that are either no longer in use or are not running at full capacity as options for new or additional production.

While additional equipment may be required, or existing equipment may need to be modified, this can often be more cost-effective than building a new facility from the ground up. This is especially true in cases where the previous use is similar in nature to the new intended use. The addition of new equipment is still considered part of a brown field investment, while the addition of any new facilities to complete production do not qualify as brown field. Instead, new facilities are considered green field investing.

Brown Field and Green Field Investing

While brown field investing involves the use of previously constructed facilities that were once in use for another purpose, green field investing covers any situation in which new facilities are added to previously vacant land. The term green field relates to the idea that, before the construction of a new facility, the land may have literally been a green field, such as an empty pasture, covered in green foliage prior to use.

RELATED TERMS
  1. Brown Bag Meeting

    A brown bag meeting is an informal meeting that occurs around ...
  2. Field Of Use

    Field of use licenses define exactly how intellectual property, ...
  3. Green Marketing

    Green marketing consists of marketing products and services based ...
  4. Retail Credit Facility

    A retail credit facility is a financing method which can provide ...
  5. Committed Facility

    A committed facility is a credit facility whereby terms and conditions ...
  6. Green Monday

    Green Monday is a retail term for the second Monday in December, ...
Related Articles
  1. Investing

    Permanent Portfolio Locks In Long-Term Profits

    Harry Browne believes his "permanent portfolio" theory is the ideal long-term investing strategy.
  2. Investing

    Strike Gold With Junior Mining

    Learn what to watch out for to ensure your "sure thing" isn't another Bre-X.
  3. Investing

    Green Bonds: Fixed Returns to Fix The Planet

    Fixed-income investors are no longer left out of the green investing revolution.
  4. Investing

    Green Technology: a Solid Investment Choice?

    With global investing in green energy on the rise, there are abundant opportunities for environmentally responsible, financially sound investments.
  5. Insights

    What Does It Mean To Be Green?

    Green investing is the new buzzword for companies and investors. Find out what it means.
  6. Investing

    How to invest in Green Bonds

    If you want to invest in a socially responsible way, green bonds may be for you. And as the market grows, retail investment opportunities will grow too.
  7. Investing

    What Makes Energy-Efficient Buildings Pay Off for Investors

    Whether your interest in energy-efficient buildings is moral, financial, or both, take a look at the pros and cons, from a financial perspective.
  8. Personal Finance

    How to Become an Investment Banker

    The path to the top of one of the world's most lucrative fields, investment banking begins with a topnotch education.
  9. Personal Finance

    9 Green Careers With High Pay

    Being environmentally conscious doesn't mean you have to give up the comforts of life. Find out which jobs provide for both.
  10. Personal Finance

    Quantitative analyst: Career path and qualifications

    Learn about the work that quantitative financial analysts do every day, and determine what it takes to become a successful professional in the field.
RELATED FAQS
  1. What is the difference between accounting and economics?

    Discover the difference between accounting and economics by comparing and contrasting the financial discipline of accounting ... Read Answer >>
Trading Center