NEW FRONTEERS IN FINANCE: FINANCE AND SPACE ECONOMY

Space. Space and development. Space and future. Space and humanity. Space and finance.
The enormous potential of Space activity for the progress of humankind is evident looking at the contagious effect of space objects on everyday life in many areas of the Earth.

Communication, defense, agriculture, Earth observation are only some examples of the activities involved by the presence of the Space economy, through the involvement of satellites, research of new materials, fabrics, new living concepts.

But today, something new is happening. Some decades ago, in the middle of the Cold War, which established a climate of exacerbated competition between the two Superpowers of the World, the cost of these enormous investments was irrelevant because the only goal was to be the first to reach the Space, no matter the price.

Nowadays, with this feeling confirmed even during the last International Astronautical Congress (IAC 72, in Dubai), the financial aspect is gaining growing importance; investments in space are more and more projects to evaluate using the same economic rationale reserved to the others entrepreneurial initiatives.

It does not imply that investments requiring billions of Dollars or Euros could be easily realized only recurring to the money of private investors, because kinds of partnership between public and private investors are and will be necessary for several years to come, at least to mitigate the uncertainty characterizing the projects under study. This consideration shows instead, the essential role of finance that extends to fields apparently far from its scope.

In particular, SDA Bocconi presented a study on the possibility of extracting ice on the moon, evaluating the financial and economic implications that such a project could have on the in-space activity already impacting the life of human beings at IAC Dubai (two members of the research team, both of them Bocconi Faculty, Chizzolini Barbara, Department of Economics Bocconi University, and Gori Leonella, SDA Bocconi School of Management Corporate Finance and Real Estate Knowledge Group went in Dubai in October 2021).

Such an almost sci-fi project is not just a theoretical exercise but is a real opportunity of investment that requires academic consideration, including not only the technical feasibility but, on an equal footing, financial study.

The enthusiasm around the study confirms the increasing role of finance (and, in particular, of corporate finance considerations, linked to cost of capital estimation, time horizon, risk, and expected cash flows, to quote some) in the economic life of the society; future projects, to which the progress of the world seems anchored, require complete sustainability, that includes the financial perspective.

Written by Leonella Gori


SDA Bocconi School of Management