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Sustainability in Space: ESG’s Final Frontier

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In early October, the Federal Communications Commission (FCC) marked a new chapter in the history of sustainability by fining Dish Network $150,000 for abandoning one of its satellites in an orbit that was well below an acceptable elevation. This action is shining the spotlight on an issue that has been largely ignored until now—the “space junk” that satellite and aviation companies leave behind after equipment has outlived its usefulness.

Littering the skies is not only irresponsible corporate behavior, it’s also downright dangerous. Every year, there are dozens of near collisions between different types of space debris, including some 1,800 defunct satellites orbiting the earth, the Washington Post reported in January. Space debris collisions can release hazardous chemicals into the atmosphere, increasing solar radiation and depleting the ozone layer, the Wall Street Journal reported in mid-October.

“The more satellites in space, the greater the chances a collision will happen, leading to more space debris being produced,” according to the Washington Post.

It seems unlikely that this vicious cycle will end any time soon.

The most prominent satellite company in the world is SpaceX, known mainly for its Starlink fleet and controlled by Elon Musk, an outspoken critic of ESG who has been described as a “mercurial man-child with grandiose ambitions and an ego to match.” Amazon, another company with a less-than-stellar ESG track record, now has 1,000 employees developing a satellite broadband network it calls Project Kuiper, which could eventually rival SpaceX. The race is on to control the skies.

For now, U.S. law requires satellite operators to “deorbit” their satellites after 25 years, allowing them to burn up as they re-enter Earth’s atmosphere. But scientists aren’t sure what kind of effects this practice might have on the environment below. More stringent government regulations are likely, and the satellite industry is under pressure to create a uniform set of ESG metrics and key performance indicators (KPIs) everyone can follow.

Most activity in this direction appears to be coming from government and business interests in the UK and Europe, but it could hardly be considered a coordinated effort. In June, a group called the Sustainable Markets Organization unveiled its Astra Carta framework, which “aims to serve as a roadmap for the global private sector to align their space-related activities with sustainability goals…” Another set of standards, the Memorandum of Principles for Space Sustainability, was developed in the UK and had 130 signatories as of late June. And the World Economic Forum spearheaded the development of the Space Sustainability Rating, which is now managed by a nonprofit association in Switzerland.

Part of the problem is that most satellite and space exploration companies are either privately owned or based outside the U.S. Within this country, major players include defense giants like Northrop Grumman, Lockheed Martin and General Electric, and publicly traded firms such as EchoStar Satellite Services, Speedcast, Virgin Galactic Holdings, Rocket Lab USA, Aerojet Rocketdyne, and Leidos Holdings. New competitors are eagerly jumping into the fray, hoping to capture the largely untapped financial rewards this market might offer.

But investing in newcomers to this market is risky, as illustrated by the wild ride Terran Orbital’s stock price has taken this year.

In February, a German company called Rivada Space Networks awarded Terran a $2.4 billion contract to build 300 low-orbit satellites for the company. The day after the announcement, Terran’s stock price nearly doubled. But it quickly fell back down to Earth. By late October, Terran’s stock price had fallen so low that the company was notified it could be delisted from the New York Stock Exchange. A group of minority shareholders is asking the board of directors to replace the company’s CEO and separate the role of CEO and chairman, according to SatelliteToday.

“There is amazing, world-changing potential in a lot of these businesses,” the Motley Fool reported in an article called Five Space Stocks to Watch, “but there’s also a significant risk that one or more of them will fail to get the tech exactly right and never live up to their potential.”

For ESG investors, there are several questions that seem more pressing than figuring out which companies will get the technology just right. What will happen to stock prices when new regulations require these companies to clean up after themselves? Or worse, what kind of disastrous events are now within the realm of possibilities?

The good news is that satellites also offer endless possibilities to serve mankind in positive ways—connecting people in remote parts of the world, monitoring environmental changes, and detecting human rights violations, for example. As you invest in companies that are responsible stewards of our land and seas, remember to also consider the heavens.

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