Published December 19, 2022
Got prefab? Lower-carbon materials? Investments build for startups addressing embodied carbon emissions in the built environment.
By Heather Clancy
There is no shortage of companies touting the climate benefits of smart, operational control systems that fine-tune the energy performance of the built environment. Many of my first articles for GreenBiz a decade ago focused on this topic. (Eep.) The argument is compelling, and you’ve doubtless heard the rationale many, many times: The structures in which we work, play, shop, eat, heal, love and sleep account for something like 40 percent of global emissions. (Not small.)
There has been less focus, historically, on earlier stages of the building life cycle, especially the construction phase. But over the past year, more investors, startups and real estate companies have lent their pens toward drawing a blueprint for reducing embodied carbon — the emissions surrounding building materials and construction techniques. Indeed, London-based venture capital firm A/O PropTech reports that funding for companies focused on green building design, materials procurement and lower-carbon construction methods reached $2.2 billion this year — a record level.
"We are in the early innings of this transformation, but the tailwinds are growing strong … The world is slowly but surely waking up to the realization that unless we fix the built world, we will not solve the climate crisis," said Gregory Dewerpe, founder and chief investment officer of A/O PropTech. According to the firm’s research, embodied carbon could account for half of total emissions related to the built world by 2035 — about double the estimates for its current impact, according to an analysis by McKinsey.
The McKinsey report outlines some construction techniques and materials substitutions that could have the most impact in reducing carbon emissions or in acting as a form of sequestration. Anyone in the industry knows that addressing emissions related to concrete is one source of huge potential impact — about 8 percent of the world’s emissions are linked to cement, used to bind the stuff together. Steel (the non-recycled sort) is also a big culprit (estimated at another 8 percent). Hence, there’s an increased interest in low-carbon versions of these materials as well as substitutions, such as the push for mass timber in increasingly taller buildings.
Walmart’s new 2.4-million-square-foot headquarters in Arkansas, for example, will be the largest mass timber structure of its kind in the U.S. (The material comes from Structurlam, a Canadian company building a plant in Arkansas.) And as A/O PropTech’s research illustrates, several European projects are also embracing the use of mass timber (as regulations permit) including the HAUT, a 21-story hybrid wood-concrete residential building in Amsterdam, and "Wood City," a project in Helsinki, that includes an office building and hotel. (This is a topic deserving of an entire column, so let’s put a pin in it for now.)
It isn’t just wood as a substitute: Interest in bio-based alternatives such as bamboo, straw and hemp has increased, as has funding for business models that favor the use of more recycled building materials, according to A/O PropTech.
New York-based VC firm Fifth Wall, funded and advised by more than 100 of the world’s largest real estate and project management companies, is also seeing a boost in interest as low-carbon materials push toward industrial scale. Greg Smithies, the Fifth Wall partner who leads its climate tech investments, said one big challenge for ventures in this space is existing regulatory and permitting systems, which delay the use of new materials. "We strongly err toward materials that don’t need certification or retraining," he told me.
One of Fifth Wall’s 2022 investments is Brimstone, which has created a way of making Portland cement without releasing CO2 emissions — by sourcing the lime from calcium silicate rocks instead of limestone. It was part of the company’s $55 million Series A round in April, along with Breakthrough Energy, Amazon and DCVC. "It is the same stuff; they are just producing it in a different way," Smithies said.
Both Fifth Wall and A/O PropTech also pointed to heightened interest in companies focused on prefabrication and modular building techniques. Two companies generating considerable buzz are Veev, which raised $400 million in Series D funding in March; and Assembly OSM, which snagged a $38 million Series A infusion over the summer. Veev advocates a panelized approach, where preconfigured walls are delivered to sites for assembly. Productivity in construction has lagged significantly in the developed world in recent years, and these companies promise to reverse that trend. "The idea is that someone with a wrench can put this together," Smithies observed. "And your waste is significantly lower with prefab and modular."
DPR Construction, a construction engineering company based in Redwood City, California, is seeing these trends play out in projects across the U.S. Interest in prefab is "exploding," noted Ryan Poole, the company’s global sustainability leader.
Aside from reducing waste, the approach promises to make buildings easier to retrofit — something DPR’s design teams are prioritizing. "The most sustainable building is the one that already exists," he said. "We are always thinking about how we can give that facility a second chance." That could mean turning an old mill into a data center, to name just one recent project. This approach requires deeper collaboration in the planning phases to assure the right sort of materials procurement, Poole noted.
Among the companies DPR has sourced from to address embodied carbon include CarbonCure, which injects carbon into concrete during the curing process to boost sequestration and offset emissions; Prometheus Materials, which uses a biocomposite to produce concrete; and Vitro Minerals, which provides a range of recycled glass powders for use in concrete, water filtration, glass production and other applications.
One area that requires more attention in the months to come, Poole said, is how to accurately calculate the environmental impact of these new processes and evolving materials so that owners and tenants can translate them into statements of progress. "Carbon accounting is the wild, wild west." So, software that helps companies research and catalog impact also needs to be part of the footprint.
For starters, one of the best places to consult for that data is the Embodied Carbon in Construction Calculator, a free open-source resource backed by a who’s-who of companies from the architectural design, construction, engineering and tech worlds. Another, mentioned by Poole, Ecomedes, has data for more than 750,000 building products, including ratings related to more than 35 ecolabel certifications. The company’s seed funders include one of Microsoft’s venture funds, as well as construction materials company Saint Gobain. Another tool on his radar is the database from Tangible Materials, a stealthy startup less than one year old.