Built environment responsible for almost 40% of carbon emissions worldwide, follow for the International Energy Agency. And while some of that comes from the energy and materials needed to construct buildings, the largest share — almost 90% on an annual basis — comes from their use. Decarbonizing the grid can go a long way to solving that problem, but sometimes it is easier and more profitable to simply reduce emissions.
That’s where proptech can come in. By cutting carbon emissions on the operational side, it can save money for building owners and managers while enhancing the experience for occupants. We asked three venture capital firms investing at the intersection of proptech and climate technology how a focus on emissions reductions can cut a building’s carbon footprint and provide opportunity. new for profit.
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However, challenging market conditions mean that profits are not guaranteed. But for category leaders, there is significant upside potential. “This economic environment will continue to test a lot of companies,” said Jake Fingert, managing partner and Lionel Foster, investor, at Camber Creek. “Survivors will have the opportunity to expand their market share.”
And the potential market is huge. Spending to bring world real estate to net zero would take 1.7 trillion dollars per year between now and 2050, according to McKinsey. “This is the biggest capital investment supercycle any industry has ever seen,” said Othmane Zrikem, chief data officer at A/O Proptech.
We talked to:
(Editor’s note: To build a complete picture of the sector, we are looking at proptech from three different angles. This survey looks at proptech’s environmental impact and what the Startups are working to reduce their footprint and we will soon publish another report coming to technology in space. The first part of this survey. covered proptech startups solve financial problems.)
Jake Fingert, managing partner and Lionel Foster, investor, Camber Creek
There is a lot of overlap between construction technology and proptech. What would you say is the difference between the two? Where do they overlap?
We always hear people distinguishing between proptech and construction technology. However, we see a lot of overlap between these two categories and think it would be beneficial to delve into both areas. For example, we identify ourselves as a proptech company and co-lead the Series B round for Bridgit, which is identified as a construction technology company.
The built world is very large and greatly affects people’s quality of life. Technology that improves the extent to which we can use and enjoy these spaces at any stage of a building’s lifecycle is relevant and valuable. That’s the important thing. In fact, we think you need more ideas spanning the life of a building, spanning decades.
What is your investment thesis for proptech in 2023? What kind of growth are you expecting in this sector?
Our approach has always been to invest in and support the growth of companies that are truly at the top of their portfolio or on the rise. This economic environment will continue to test many companies. Existing companies will have the opportunity to expand their market share.
Therefore, we expect to see more opportunities to invest in the best companies at prices that are more in line with current performance and reasonable growth prospects. In addition, when transactions slow down, the real estate group tends to focus more on internal operations. This is often related to technology and we expect some of the companies that are helping the real estate group drive margins to increase sharply in the coming period.
A deeper look at proptech
Commercial real estate has been impacted during the pandemic. How has that affected investor interest in climate-friendly proptech?
Many of the companies in our portfolio offer sustainable solutions that also save customers money and improve operational efficiency. That value proposition is irresistible. It’s just a matter of getting that information in front of the right decision maker.
When you combine that with companies that increasingly want to lead in sustainability and are encouraged by stakeholders to do so, we don’t expect to see a slowdown in adoption of these technologies.
In the intersection of proptech and climate technology, where do you see the greatest opportunity?
About 50% CO2 A building’s life cycle emissions are generated during the construction phase, so the more we do to extend the useful life of the building, the less carbon is associated with that site. This is in line with the interest of investors and tenants in spaces that can accommodate multiple uses, sometimes simultaneously, sometimes over time.
There will be a lot of activity around data-driven retrofits, innovation, and venue selection helping people discover uncharted spaces that might meet their needs. We are also spending significant time in areas like IoT and sensors, where innovations can have a potentially large impact on climate.
The Inflation Reduction Act provides substantial tax credits for energy retrofits. Does that change the type of startup your company considers? If it does, in what way?
The Inflation Reduction Act is arguably the most important piece of climate legislation in US history. You mentioned incentives for retrofits, but experts like those at our investment firm Arcadia are also predicting a “solar rush” – a huge leap forward in manufacturing clean energy, connecting clean energy supplies to a more resilient grid, and developing clean energy assets in low- and middle-income communities.
We have had many conversations with companies working on renewable energy solutions and sustainable buildings, but we expect to see much more activity in this space and more innovative solutions. than.