A new book by Dr Armen Papazian, a PhD graduate of Cambridge Judge Business School, outlines a new financial modelling framework that integrates sustainability into the very core of finance.
The book entitled The Space Value of Money: Rethinking Finance Beyond Risk and Time is published by Palgrave Macmillan, with the hardcover edition already available.
The book discusses and outlines how our financial value framework and equations must change to reflect our new priorities, offering a new financial mathematics of sustainability that goes beyond ESG integration (Environmental, Social, Governance).
Armen, a financial economist and founder of the Space Value Foundation and cloud-based analytics platform Value Xd, outlined the core principles of the Space Value of Money in an article last year on the Cambridge Judge website.
6 highlights from the book: Space Value of Money
- “To truly integrate sustainability, we must transform our core principles and equations of finance, such that our mathematics of value and return are made to reflect our sustainability objectives and Net Zero targets.” Otherwise, our frameworks, standards, and ratings will remain tangential to the mindset and equations that govern money, its creation, allocation, and deployment.
- “A new financial mathematics of sustainability must start by introducing space into finance theory and practice, as an analytical dimension and our physical context.” This is critical and necessary in order to expand the current analytical value framework of finance theory and practice, built vis-à-vis time and risk.
- “We then need to introduce a new principle, the Space Value of Money, to establish our spatial responsibility, to ensure that a dollar invested in space has at the very least a dollar’s worth of positive impact on space” – a principle that complements our current framework and facilitates the new financial mathematics of sustainability.
- “While investors remain free to pursue their returns and discount their expected future cash flows, i.e., adjusting them for their risk and time value, they must also account for the space impact of cash flows in the present and compound them into the future when necessary” – a fundamental change to the many models of value and return widely used in finance.
- “We must account for our impact on space, stretching from subatomic to interstellar space with every layer in between and beyond, and address all types of pollutants and waste, as well as biodiversity loss.” Focusing on just the carbon in the air, or plastic in the ocean, or sewage in our beaches and rivers, or debris in orbit would be an ineffective response to the multifaceted crisis of human responsibility that we face.
- “The space value principle and metrics offer a framework through which we can integrate responsibility into our core finance models and ensure long-term transformations in human productivity,” necessary to secure its sustainability as well as continuous expansion.