The Built Environment – An overview

The Environmental Challenge

The climate challenge that the built environment faces is as large as challenges come. Building emissions are currently responsible for ~40% of all global emissions. We need to get to zero within the next 30 years, by building new buildings at net-zero (and at scale) and decarbonizing the existing building stock. Sounds hopeless? Well, challenging to say the least. But thanks to a massive amount of innovation ranging from carbon capture to IoT powered energy efficiency, certainly not hopeless. Let’s start breaking down the numbers.

39% of Global Greenhouse Gases

The building sector is responsible for a hefty 39% of total emissions. Building operations make up 28% of that, and carbon within building materials and construction (i.e. embodied carbon) make up the other 11%. Within building operations, energy use is driven first and foremost by space heating, followed by water heating and cooking – all of which are typically gas-powered. As for embodied carbon, concrete, iron, and steel alone produce ~9% of annual global GHG emissions – from their manufacturing process or the fossil fuels burnt for these processes. 

Global emissions per sector 2017

Adding a New York City every month

Meanwhile, the demand for new buildings is insatiably driven by population growth and increasing urbanization. By 2060, two-thirds of the global population will live in cities – which requires an additional 230 billion m2 of new floor area. Translation: we need to add an entire New York City every month for 40 years.

The Grand challenge

So here is our challenge: while doubling floor areas, we need to eliminate emissions from cement, steel, other materials and construction activities. We need to go 100% net-zero for any new build. And also… we need to decarbonize existing buildings by ramping up to 100% renewable energy, drastically improving energy efficiency and going ‘gassless’. The ultimate climate mitigation and adaptation challenge.

The Market Challenge
If we don’t address the (many other) fundamental problems in the urban environment industry, we won’t reach the long-awaited net-zero finish line quickly enough*.*

Digitalisation who?
Large-scale construction projects are usually delayed 20 months beyond their original schedule, and spend an average of 80% more than the planned budget. Project planning across entities and locations is uncoordinated and commonly takes place on paper. To sum these problems up, the construction industry is the second least digitised industry after agriculture & hunting. And when your name is next to hunting in the blacklist of digitalisation 📓, you know things are not going great.

More people, more buildings
On top of the existing buildings that need to be renovated, global population growth and urban migration come into the picture to induce unprecedented urban expansion. This expansion will only magnify all of the above-mentioned challenges. Within emerging markets, this provides an opportunity to funnel $24.7 trillion in green-buildings-related investments towards cities by 2030. So let’s get funnelling! 

Solution Areas

Recent extreme weather events illustrate the fact that climate change is already happening and requires near-term adaptation of buildings and infrastructure. The key innovation challenges facing the built environment can be summarized as follows:

  1. Energy inefficient building stock: within developed economies, 50-80% of building stock that will exist in 2050 has already been built. To reduce the energy consumption of these buildings, we must improve their efficiency. Think high-efficiency devices or smart management solutions.
  2. Inefficient building processes: the more efficient our construction methods, the less waste of resources and energy. Areas that can help here are offsite & modular construction, construction tech SaaS, and 3D printing.
  3. Unsustainable building materials: we need to use better, smarter materials or re-use them. In cases such as cement where we have no alternative materials, carbon capture and storage can help mitigate emissions.
  4. Inefficient urban design: more efficient urban design means less traffic congestion, healthy environments, improved biodiversity, and cooler cities. Investable technologies in this space include urban planning software and geospatial analytics.
  5. Adaptation and resilience against climate change: climate change is increasing the frequency and severity of extreme weather events (with the Caldor Fire in California spreading as we write this). Climate and weather risk data, as well as disaster and emergency management, can help us prepare for these events.
  6. Enabling technologies: the road to a net-zero built environment will require the support of technology that enables all of the above-mentioned solutions. Think of IoT networks & sensors, and cyber security.

Actors Involved

These urban sustainability solution areas offer an exciting market opportunity and fuel our belief that not all hope is lost… and we’re not the only ones who think so. Ranging from governments to venture capital funds to early- and late-stage start-ups, a large number of players are active in this space. So, we at Carbon Equity present: the who’s who of urban climate solutions.

The Funders
First of all, who’s funding urban sustainability? The funding actors behind urban tech can be split into public and private. Starting with the public sector, in recent weeks Biden’s $1 trillion infrastructure and clean energy bill have been hitting the news. This plan includes upgrading 4 million buildings and weatherising 2 million homes over 4 years, as well as constructing 1.5 million sustainable homes and housing units.

Moving on to the private markets, venture capital funds that are active in the urban environment include household names like Andreessen Horowitz (with companies such as Mosaic in their portfolio), and pureplay firms like 2150 (for which we offered our first feeder fund at Carbon Equity). Over the past decade (2009 – 2019), VC investment in construction tech has outpaced overall VC activity 15-fold (!).

The Founders
Having established there is increasing capital flowing into the urban environment, who is actually receiving it? Starting with a startup success that has been recently exited, an example is Spacemaker: an AI architecture design software tool that helps build sustainable cities at scale by improving decision support in real estate development and was acquired by Autodesk in late 2020. Other exciting earlier-stage companies right now include Blueprint Power, which is opening the energy marketplace to real estate owners by helping them sell their excess electricity and thus transforming the built environment into a flexible power network. On the materials side, Boston Metal is producing emissions-free steel by electrifying metals production through molten oxide electrolysis.

Of course, we will not attempt to list all of the up-and-coming innovations in urban tech, so for that, we resort to a market map first constructed (see the pun there?) by Shadow Ventures:

Built environment landscape

Now back to Carbon Equity
After throwing all this information at you, you might be asking yourselves: okay, if urban sustainability is so relevant to the climate crisis, what is Carbon Equity doing about it? Well, we’re glad you asked! We invested our first Feeder Vehicle in 2150’s Urban Tech Sustainability Fund I, which focuses exclusively on technologies that support the decarbonization of the built environment. And while we’re wrapping up our who’s who of urban climate solutions, we’ll plug in 2150’s gigacorns: CarbonCure and Nodes & Links. CarbonCure injects captured carbon dioxide into concrete, thereby embedding it in the material. Nodes & Links uses complexity science and structured project data to help project managers deliver projects faster and at less cost.

If these disruptive companies make you want to run to our website to buy a ticket on board 2150, you are unfortunately too late (it sold out in a few weeks). But, no need for disappointment, we are launching our first Portfolio of Funds in October! You can stay tuned by signing up for our waitlist here.

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