Fifth Wall and British Land lay out their advice for identifying the solutions that will most effectively reduce your portfolio’s emissions.
British Land made a strategic investment into VC firm Fifth Wall’s Climate Technology Fund in January. Collaborating with someone with their finger on the pulse is part of the developer’s goal to reach net zero carbon by 2030.
Following the announcement, PlaceTech spoke to British Land and Fifth Wall for their advice on adopting climate tech in office buildings.
This is what they suggest:
1. Do a net zero carbon audit
Start by understanding your current usage, collecting energy data on your buildings and plotting the changes throughout the day and year.
This will involve some tech – installed sensors and meters – but David Walker, chief operating officer at British Land, says: “A large part of that is working with our customers, the occupiers of our spaces, to understand how they use the space. How is it changing? How do they think that will change over time?”
Walker says the most impactful changes British Land identified were: switching to LED lighting, upgrading insulation and cladding and switching from gas boilers to heat pumps.
But evaluating exactly what areas you need to invest in can be costly, especially if you’re a smaller landlord without the resources to appoint a team to tackle it. Greg Smithies, partner and co-head of climate tech at Fifth Wall, says that the VC firm is actively looking at startups that can evaluate buildings for landlords.
2. Sort out low hanging fruit
Smithies says most people have done their LED retrofits in the last decade, ripping out their old lights, replacing them with LEDs and cutting energy use by about 20% in the process.
The next step is to upgrade HVAC systems, given that 30-60% of an office building’s power goes into air conditioning. Think about higher efficiency electric motors (Smithies plugs Fifth Wall’s investment into Turntide, which provides just that) and better filters that create less drag in the system.
Once that’s done, think about procuring clean energy. “This is where you have to get a little bit creative and think outside the box,” Smithies says. There isn’t enough clean energy in the world, and landlords will have to look into power purchase agreements with, for example, someone building a wind farm.
3. Partner with a ‘filter’
One reason developers partner with VCs is the sheer size of the climate tech sector. Last year, Fifth Wall looked into 1,300 different startups and invested in five. Perhaps unsurprisingly, British Land thought: “Can [Fifth Wall] act as a filter for us,” Walker says. “Can we get an early, filtered look at some of these emerging technologies that we can then plug into our business?”
By feeding the results of a carbon audit to someone with an overview of the market, you can narrow down the startups most useful to you.
That collaboration goes both ways. Smithies says: “You can use Ph.D. scientists and research to figure out if the technology works, but typically, figuring out if the market is going to buy this thing is very difficult.”
By working with developers across the industry, a VC can check whether a startup’s product has potential.
4. Be an early bird
“The primary value for someone like British Land in working with Fifth Wall is they get bumped to the front of the line for these new technologies,” says Smithies.
That early-bird advantage is especially useful in climate tech because these startups often build physical machines, rather than just software. As small companies, they will be constrained in how much they can manufacture, so getting in early is important.
5. Accept that climate tech isn’t sci-fi
“The most exciting things to me are, frankly, very boring,” Smithies says. While some areas of climate tech will try to create machines that suck carbon out of the atmosphere, the things that really move the needle in buildings are better air conditioning systems, better insulation, solar panels and batteries.
Walker adds: “Tech is going to play a really important role here, but at this stage your practical asset management interventions are the fundamental driver of short-term further improvement.” Sometimes you need to sort out how efficiently you use the building before diving into tech.
6. Prepare for conflict
You will have conflicting priorities when timing your upgrades or retrofits. Walker uses boilers as example. If your buildings are equipped with boilers that have a useful life of five or 10 more years, replacing them is not necessarily the best thing to do.
He says: “The right thing to do, given the building is already in place, the boiler is already working, is to leave that to the end of its natural life. The conflict is in terms of your EPC certification or your energy consumption today.”
There will be some compromises along the way.
7. Think IRR, not capex
Installing green tech is not just an expense that needs to be paid off at some point. Rather, it directly raises the value of your asset – especially in the face of new environmental regulations around the world.
Smithies says: “The forward-thinking owners are looking at these investments as an investment that has an IRR and actually moves through to your net asset value.
“The number one mistake that most people are making is not thinking about the financial, real implications of these investments correctly.”
8. Take a peek at what others are doing
Every major developer will be thinking about these questions, some more directly than others. Take a look at what your peers and competitors are doing, because, ultimately, cutting carbon is a collective goal for the industry.