Investing in Space: Impact Seeded Inside Innovation
By Tim Chrisman, Skytop Contributor / August 1st, 2022
Tim Chrisman is a space policy and geopolitics expert who writes extensively about the future of humanity in space. He leads the Foundation for the Future, a nonprofit based in Washington, D.C. which is leading the policy conversation around space infrastructure. Tim founded the Association for Space Finance, the industry association representing space investors, and whose membership ranges from small family offices to Barclays Investment Bank.
Tim is a former Army officer, who spent nearly a decade leading intelligence teams in combat and special operations units through five deployments to Iraq and Afghanistan. After his military service, Tim was selected to be a special advisor to the Chairman of the Joint Chiefs of Staff before joining the Central Intelligence Agency. He held multiple assignments at the Agency, including with the Directorate of Operations and Directorate of Analysis, culminating in a role supporting the National Space Council.
Tim studied at American University where he earned his Masters in International Relations and Affairs; the second of his two master’s degrees (the other is in Intelligence Studies). Tim is the author of the book Humanity in Space and is a prolific writer about the expanse of our civilization in space.
Impact Not Lost in Space
Impact investing is generally defined as an investment strategy that seeks to generate returns while also creating a positive social or environmental impact. Typically, there is an understanding that an impact investment will have a lower rate of financial return because of the tradeoff between social and financial priorities. This has historically been viewed as an acceptable tradeoff to many investors as a way of giving back to their communities. However, it has changed recently as “big capital” (institutional investors) have demanded market competitive ROI while creating what has often been considered non-financial returns. Unfortunately, impact investing has often been conflated with philanthropy.
Likewise, capital allocators, big and otherwise, don’t have to make that choice in the commercial space sector.
Cosmetics Versus Commitment
Impact investing has become a faddish metric that, while a well-meaning idea, is often exploited to allow companies to wrap their legacy activities in a new and virtuous banner. For many large companies and in established sectors, impact investing is more a demonstration of intent rather than something that actually produces results. This is evidenced by recent actions of the Securities and Exchange Commission threatening to standardize ESG metrics to quell the increasingly natural desire of public companies to greenwash.
Impact investing or conscious capitalism is a fantastic idea that has the potential to expand workforce participation, decrease inequality and protect the environment.
However, what plays out is that companies reframe their existing activities to meet these new metrics. That isn’t a condemnation. If you are a large, international corporation, the amount of change possible in any given year is miniscule.
So, while there is the intent to shift, the actual impact of that intent is unlikely to be felt for years.
Impact is Best if Seeded with Innovation
Impact, like innovation, is seen most readily in startups and new industries. Take the internet for example. It wasn’t AT&T that innovated network hardware; it was startups like CISCO who did that. Likewise, if investors want to have a true impact, one that creates a positive social or environmental effect, they should look to new companies and sectors.
Commercial space is one of those new sectors. This sector was made famous by behemoths like SpaceX and Blue Origin, but it’s newer companies like Cislunar Industries, Nebula and Privateer that are the truly exciting impact plays.
Reasons
Why? Because these companies are tackling the problems around the pollution of heavy industry, the power intensive power requirements of cloud computing, and Earth observation (which uses data to find, track and mitigate the most polluting portions of supply chains).
And that is only three companies. There are hundreds of companies working on moving polluting industries off-world, creating massive space-based solar power plants to power cities on the ground, pushing the technological envelope of vertical farming and biomedical engineering.
Those are just the environmental benefits. Space companies are creating novel pharmaceuticals, 3D printing organs and supporting improvements to the agriculture and mining sectors.
Jobs Reimagined
Space also offers a huge opportunity to expand opportunities for middle-skilled laborers around the world. Whether welders or pipefitters; tailors or electricians; the sector has nearly a half million workers now and is projected to double employment over the next 10 years, creating hundreds of thousands of new, skilled labor positions.
All this social and environmental impact is fantastic. However, these positive benefits are also accompanied by returns that rival the broader market.
From 2017 to 2021 space investments in the UK saw a CAGR of over 30%. In comparison, over that same time the NASDAQ grew 36%, the Dow grew 17% and the S&P 500 had a return of 22%. The size of the global space sector is expected to exceed $1T in the next 10-15 years.
Intentions matter in all relationships, and in business, like in good relationships, performance is everything. Space is for impact. Of the ROI kind!