Why space is the final frontier in ESG investing
Space technology solves humanity’s most daunting challenges including climate change
How do we get exposure to space related stocks?
As millions of people across North America witnessed the spectacle of a total solar eclipse last week, the allure of space is once again capturing our collective imagination.
But beyond the realms of eclipses and science fiction, what exactly awaits us in the coming decades?
Forecasts suggest a burgeoning global space economy projected to reach a staggering US$1.8 trillion by 2035, a substantial leap from its US$630 billion valuation in 2023.
This surge promises to unlock opportunities spanning various industries, and potentially offer solutions to some of humanity’s most daunting challenges – including the urgent threat of climate change.
Space does play a crucial role when it comes to climate change – in several ways.
Firstly, satellites enable scientists to observe the Earth’s climate system by monitoring changes in temperature, sea levels, ice caps, deforestation, and carbon dioxide levels. These information provide invaluable data for climate research.
Satellites also help develop early warning systems for extreme weather events, such as hurricanes, floods, and wildfires – providing timely information to communities at risk.
Secondly, space technology including satellites helps combat climate change through natural resource management. This includes monitoring forests, agricultural lands, and water bodies.
And more recently, space-based solar power, which involves capturing solar energy in space and transmitting it to Earth, is a potential alternative energy source. This could provide a continuous and abundant supply of clean energy, helping reduce reliance on fossil fuels.
‘Game changer’
With the rising significance of ESG, the space industry will become an increasingly critical part of how every company operates.
This momentum has been accelerating after BlackRock, the world’s biggest asset manager, announced that it will base its investment decisions exclusively on ESG criteria.
“Climate risk is investment risk,” proclaimed BlackRock’s boss, Larry Fink.
This shift in mindset is a game changer for the industry, because it will reallocate funds to companies with distinctive focus on climate, especially those with a long-term focus on ESG matters.
“Nature will be on the balance sheet, which means space will be on the balance sheet because you can’t see ESG without space” said Andrew Zolli at US satellite imagery operator, Planet.
This reliance on space will grown even further as more businesses realise that going forward, they will need to measure their carbon emissions and other impacts on climate, and report them to regulators.
Those reports will require more and more space technology like remote sensing, which provides a scalable, low-friction data source to quantify climate and decarbonisation risks.
“The adage ‘if you can’t measure it, you can’t manage it’ is particularly relevant to climate action and ESG reporting right now — a compelling reason for the space industry to become involved in this burgeoning ESG landscape,” said Cooper Elsworth of Descartes Labs.
Australia’s space industry
Unfortunately, Australia’s space industry is facing an uphill battle and might be left “in limbo” after the $1.2 billion National Space Mission for Earth Observation program was scrapped last June.
The observation Program was intended to finance satellites that supply data for a wide array of applications, ranging from weather forecasting and GPS, to aiding in natural disaster response efforts.
The backing out by the government has taken the confidence out of the sector and more crucially, the ability of local space companies to attract major funding at home – which means a number of them could be looking to move their operations overseas.
“Government support for the space industry needs to be bipartisan. I think the problem we have at the moment is it’s being treated as a partisan issue,” said Bec Shrimpton, the director of ASPO told the ABC.
“I have to wonder about whether space is in the right portfolio right now, because it is not getting any attention at all from Minister Husic [Minister for Industry and Science] — quite the opposite,” Shrimpton said.
Where can I buy space-related stocks?
For those seeking exposure to the space industry, most of the current opportunities available are in the US.
Companies like Lockheed Martin (NYSE:LMT) and Virgin Galactic (NYSE:SPCE) are making strides in satellite launches, spacecraft deployment, as well as developing advanced communication networks.
Rocket Lab USA (NASDAQ:RKLB) meanwhile is a leading supplier of satellites, subsystems and spacecraft components. The company also manufactures guided missiles and space vehicles.
Other space companies are still privately held, for instance Space-X, Axiom Space and Astranis.
Space-X is currently valued at US$175bn with no plans to go public just yet, while Astranis is valued at US$1.4bn, and there are rumours of an IPO in the future.
On the ASX, most of the the space-related stocks are defence related, such as Electro Optic Systems (ASX:EOS), Dronshield (ASX:DRO), and Elsight (ASX:ELS) .
The post The Ethical Investor: Why the space industry could be the next frontier for ESG investors appeared first on Stockhead.
