Innovative new idea category
Space Value Optimisation - a financial value model that transcends time and risk to expand and improve existing approaches to sustainable investing.
While there has been significant progress in making sustainability a mainstream concern, there is still a large pool of capital deployed outside the guidelines of sustainable investing. In the words of Armen Papazian: ‘Between 2012 and 2014, global sustainable investment assets grew by 61%, from $13.3 to $21.4 trillion. In this same period, the proportion of total professionally-managed assets that are deployed based on sustainable investment strategies increased from 21.5% to 30.2%. In other words, in 2014, 69.8% of all professionally-managed assets were not invested according to sustainable investment strategies. To put these figures in context, by mid-2014, total global wealth was estimated at $262.6 trillion.’
Papazian argues that a change in our value framework is needed if sustainability is to reach its longterm goals. ‘To achieve this,’ he says, ‘we must transcend our risk/time models, and build on and expand our current approaches to sustainable investing.’ The answer, he says, is to change the way in which we measure, design and value our investments. ‘We will need to address impact and return together, and allow investors the opportunity and possibility of optimising their space impact in line with our Global Goals, across projects and different asset classes, using the latest technology,’ he says.
Papazian introduces a new principle and metrics of value, a new analytical tool for Space Value Optimisation, which could help CFOs and finance functions design and value investments in a way that optimises what he refers to as their space impact. The Space Value Optimisation tool fills an important market gap, and supports the widespread implementation of ecologically and socially sound investment models and algorithms that are seamlessly integrated with our current models.
Discussing one of the key new metrics of space value, the Space Growth Rate, Papazian argues that the adoption of a required space growth rate for a project would have practical implications for the investment and its sustainability. He argues that a required space growth rate for public investments could become an economy-wide benchmark rate for sustainable investing, while setting high standards for private investments and monetary injections.
The idea supports the following Sustainable Development Global Goals: