All the way to zero

Climate-tech is the BIG opportunity at the moment, and it plays right into the Proptech/Real Estate world. We are starting to see a lot of Corporate VCs coming into market with significant amounts of capital to deploy and looking for high quality dealflow + global market access. That's where our team steps in and we do a lot of work on benchmarking technology + helping our clients understand the risks involved with adoption/investment.

We see dozens of solutions each month from across the globe tackling many of these types of issues + what is clear is that every company needs bespoke solutions. Contact us today to find out how we can help you with your Proptech or ESG strategy.

Decarbonization + Proptech:

It's the single-largest industry in most developed economies, and for that reason real estate has an incredible decarbonization opportunity. It is expected that real estate owners who fall behind on decarbonization are going to be penalized with significant cost of capital premiums. First in the European markets, than the rest will follow suit...

In a world where decarbonizing is as important as it is today, investments in carbon-reducing technologies are increasing steadily. Between 2017 and 2022 >4.5 billion (USD) of early-stage capital has been invested in companies that focus on decarbonizing the AEC sector. The highest level of investment was reached in 2022, when it attracted >2.2 billion USD.

Let’s have a look at the (sub) sectors that need the most decarbonization. A new wave of low carbon and bio-building materials could turn global cities into carbon sinks, potentially as large as the Amazon.

But how far is the world in its way to net zero?

Decarbonizing the world: a sector overview

When we look at the sectors that produce the most greenhouse gas emissions we can identify nine emission-intensive industries: Power, Oil and Gas, Automotive, Aviation and Shipping, Steel, Cement, Mining, Agriculture and Food, and Forestry and Land use. In this article we will do a deep dive into each sector. What’s the current state of affairs, in terms of decarbonization, and what are the opportunities for the future?

The prices of renewables in the power sector, have dropped significantly. The result is that the “green” forms of energy are now more price-competitive with their conventional siblings. Solar power dropped up to 80% in price and wind power came down by 40%. The sector is making headwinds, but the availability needs to significantly increase in order to meet the (rapidly growing) global demand of energy. By 2035, > 50% of the global power can be from renewables.

Most Oil and gas companies have set net-zero targets. Most companies are, in some shape or form, reducing and offsetting emissions, while others are focused on investing in new technologies and businesses, such as hydrogen. The traditional oil and gas industry sector will need to change the most. As an example, a 10 percent increase in the efficiency of oil and gas production, could result in a 4 percent reduction in emissions intensity. On top of that oil and gas companies have operational expertise + lots of capital which should benefit them to position to the net-zero path. Management can look into managing carbon, rebalancing portfolios, and playing within their core strengths.

The sales and production of low-emission cars have surged, making the automotive sector greener every year. By 2035 it is projected that new passenger-vehicle sales in the biggest markets will be close to 100% electric (!). By 2050 all new car sales should be electric. To reach this, new supply chains and manufacturing capabilities are needed as well as charging stations and hydrogen fueling stations. Lots is happening in this space already.

Aviation and shipping both share similar solutions. Modernizing fleets on one side and increasing the use of sustainable fuels on the other side. Sustainable fuels, which can be produced from forestry waste or other biomass, can reduce emissions by 70 to 100% in comparison to fossil fuels! Airlines are also exploring (hybrid) electric and hydrogen options for short flights. In total, aviation can address 17% of global commercial aviation CO2 emissions with lower-carbon technologies.

The shipping industry has zero-emission fuel technologies available that need to be scaled to meet demand and reduce costs. Rail freight is also coming up as a low-emission way of transport. Did you know that rail transportation has a CO2 footprint that is 27 times (!) lower than air freight?

For the steel industry a successful transition to net zero will require large-scale investments in new technologies, new materials, and renewable power sources. The demand for green steel is rising and major steel companies have started their way to net zero. Where in 2020 the demand for low-emission steel was only 15%, it is estimated that by 2050 the demand will be close to 100% production by low-emission.

Cement has seen some low-emission equivalents popping up in the market, but here is still a lot to win and to explore. Some companies use advanced analytics to optimize energy efficiency or experiment with new production methods to reduce CO2. The cement industry can reduce emissions up to 75% by 2050, with alternative fuels, new technologies, and other measures.

A sector that is expected to grow faster than ever is the mining sector. Copper, Lithium and Cobalt will be needed more and more for decarbonization efforts: Copper is a crucial element in the electrification and Lithium & Cobalt are two major components in batteries. Within a short period of time the supply will need to increase significantly to match demand. In some cases, the market needs to grow 10 times from the current market size. It is crucial that the mining process itself will take place as clean as possible with the help of sustainable fuels and green electricity. The decarbonization of haulage trucks can reduce mining emissions by 25%.

How about the controversial agriculture and food sector? The number of vegans in the U.S. grew from 4 million in 2014 to 20 million in 2018 (600%) and is now in 2022 around 80 million. Going Vegan (regardless of your personal opinions) does cut an individual’s carbon footprint by 73%.

But what if we don’t want to go vegan? Promising technologies in animal feeding, soil carbon sequestration, and crop fertilization are in development or are already in use. Opportunity are to be seen in decarbonizing farm equipment and machinery, including tractors, harvesters, and dryers. Cost reductions and supportive financing can accelerate the adoption of these attributes. The market for cultivated meats is expected to grow to 25 billion USD industry by 2030.

Annual investments in new technologies are projected to attract 400-600 billion USD by 2025.

The last sector on our list is forestry and other land use. Forests are natural carbon sinks. Preventing deforestation and stimulating the plantation of new forests are substantial and relatively cheap ways of decarbonization. Reforestation can be used to off-set emissions that are hard to abate. The market for carbon credits can be worth 50 billion USD by 2030.*

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*McKinsey report: https://www.mckinsey.com/capabilities/sustainability/our-insights/decarbonizing-the-world-industries-a-net-zero-guide-for-nine-key-sectors?cid=other-eml-onp-mip-mck&hlkid=6132736332bf4d78adc73b7b33673ae1&hctky=13527732&hdpid=b1b4b781-7d46-4f85-a0be-ee47abea7c61

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