The Space Value of Money introduces a fresh and innovative perspective on sustainability and finance. It expands our financial value framework, heretofore built around risk and time, by factoring in space, as an analytical dimension and our physical context. The proposed principle and metrics entrench our responsibility for space impact into our value equations, making finance inherently sustainable and acting as a theoretical bridge between core finance theory and the growing field of sustainable finance or ESG integration. The book offers a novel approach to value design, measurement, and creation, discussing the theoretical, mathematical, institutional, technological and data elements of the transformation.
The Space Value of Money principle and metrics offer us the opportunity to adjust our financial value framework and transform human productivity in line with our sustainability targets. They also enable the design and engineering of the financial instruments that can help us address our evolutionary challenges/investment, like the transition to Net Zero.
“Every once in a while, a book comes along that makes a fundamental contribution that is both profound and practical. A book that every member of the National Space Council, including the NASA Administrator and the Space Force chief of space operations should read. The Space Value of Money will be of interest to ESG and impact investors, government regulators, financial theorists, and outer space enthusiasts.” ―Lt Col Peter Garretson, Senior Fellow in Defense Studies at the American Foreign Policy Council
“No doubt, the pressing environmental challenges we face make the concept of the space impact of investments even more compelling.” ―Dr. Pascal Blanqué, Chairman of Amundi Institute, Former Group CIO of Amundi Asset Management
“The Space Value of Money brings much needed conceptual rigour, whilst further advocating the case for a new paradigm shift in financial valuation. This work gives us the lasting frameworks that aggregate impact across all spatial dimensions. Dr. Papazian culminates over ten years of research in this rich book, providing the springboard for further innovation and system implementation in this area.” ―Domenico Del Re, Director, Sustainability and Climate Change, PwC
“Enthralling and captivating. Papazian offers a clear, thorough, and comprehensive discussion. The Space Value of Money gives us an opportunity to reframe our thinking and to explore what is possible. A great read!” ―Daud Vicary, Founding Trustee of the Responsible Finance and Investment Foundation
“Armen has developed a novel way to create financial models that are better suited to dealing with the many parameters required if we are to properly consider environmental factors and sustainability in economics and finance. I have found this engaging and look forward to seeing its future use.” ―Dr. Keith Carne, First Bursar, King’s College, Cambridge University
Author(s): Armen V. Papazian
Publisher: Palgrave Macmillan
Year: 2022
Language: English
Pages: 274
City: London
Preface
Acknowledgments
Contents
About the Author
Abbreviations
List of Figures
List of Tables
List of Charts
1 Introduction
References
2 Finance: A Value Paradigm and Equations Without Space
2.1 The Risk and Time Value of Money
2.1.1 Discounting Cash Flows and the Net Present Value Model
2.1.2 Company and Stock Valuation Models
2.1.3 The CAPM: Capital Asset Pricing Model
2.1.4 The Sharpe Ratio
2.1.5 The Arbitrage Pricing Theory and Three Factor Model
2.1.6 Market Efficiency, Anomalies, and Risk-Adjusted Abnormal Returns
2.1.7 The Modigliani Miller Theorem and Corporate Investment
2.1.8 The Black and Scholes Option Pricing Model
2.1.9 Technical Analysis & Comparables
2.2 Space in Finance
2.3 Externalities
2.4 Conclusion
References
3 Sustainable Finance: Frameworks Without Value Equations
3.1 Carbon Budgets and Pathways
3.2 Sustainability: Standards and Frameworks
3.2.1 The TCFD Framework and Climate Disclosures
3.2.2 Climate Risks and Climate Responsibilities: Double Materiality
3.2.3 Alignment Through Engagement not Divestment
3.3 Portfolio Alignment Tools
3.3.1 Carbon Intensity
3.3.2 Implied Temperature Rise
3.4 ESG Ratings
3.5 ESG Integration in Practice
3.6 Responsible Banking, Nature-Related Financial Disclosures, and Impact Investing
3.6.1 Impact Investing
3.6.2 Principles of Responsible Banking
3.6.3 Impact on Nature and the Taskforce on Nature-Related Financial Disclosures
3.7 The Market Shaping Sustainable Finance and ESG Reductionism
3.7.1 ESG, Responsible, Climate, and Sustainable Finance
3.7.2 Space Layers and Sustainable Finance
3.7.3 Technology and Sustainable Finance: AI, Algorithms, and Digital Data
3.7.4 Money Mechanics and Sustainable Finance: Debt vs Crypto
3.8 Conclusion
References
4 The Missing Principle: Space Value of Money
4.1 The Transition Challenge: Impact & Return
4.2 The Space Value of Money
4.3 The New Stakeholders of Finance
4.3.1 A Pollution-Averse Planet
4.3.2 An Aspirational, Eternal, and Growing Human Society
4.4 The Risk and Time Features of Our Evolutionary Challenges
4.4.1 Short-Termism and Quarterly Capitalism
4.4.2 Funding Evolutionary Challenges
4.5 Conclusion
References
5 Quantifying Space Impact
5.1 The Space Impact Timeline
5.2 Space Impact Granularity
5.3 Mapping the Space Impact of Investments
5.4 Quantifying Space Impact
5.4.1 Planetary Impact: Pollution, Waste, Nature and Biodiversity
5.4.1.1 Pollution and Waste
5.4.1.2 Biodiversity
5.4.2 Human Impact: Human Capital and R and D
5.4.2.1 Human Capital
5.4.2.2 Research and Development
5.4.3 Economic Impact: New Assets and New Money
5.4.3.1 New Assets
5.4.3.2 New Money
5.4.4 Governance
5.5 Net Space Value or Aggregating Space Impact
5.6 Space Impact Types and Intensity
5.7 The Space Growth Rate
5.8 Conclusion
References
6 Integrating Impact into Value
6.1 Impact and Discounted Cash Flows
6.1.1 A Simplified Example
6.1.2 The Impact-Adjusted Present Value of Cash Flows
6.1.3 Impact-Adjusted Firm Value with Constant Growth
6.1.4 Impact-Adjusted Firm Value with Variable and Dual Period Growth
6.2 Impact-Adjusted CAPM, APT, and Three Factor Model
6.3 Impact-Adjusted Returns
6.4 Conclusion
References
7 The Algorithms of Sustainable Finance
7.1 Digitising Confusion
7.2 Digitising Sustainability
7.2.1 Data
7.2.2 Algorithms
7.3 Conclusion
References
8 Sustainable Money Mechanics in Space
8.1 Money Creation via Debt
8.2 The Challenges of Debt-Based Money
8.2.1 Calendar Time and Space
8.2.2 Monetary Gravity and Monetary Hunger
8.2.3 Innovation, Risk, and Control
8.3 Value Easing: Sustainable Money Creation
8.3.1 From Debt to Space Value Creation
8.3.2 Climate PCN
8.3.3 NASA PCN
8.4 From Debt Ceiling to Wealth Floor
8.5 ‘Money’ Creation via Mathematical Guesswork
8.6 Conclusion
References
9 Conclusion
References
Index
