Construction: An Impact Opportunity

Construction: An Impact Opportunity

Deep dive on the circular construction investment case.

Manuel Antunes
Manuel Antunes

IN THIS PUBLICATION:

  • Construction and demolition industries are Europe's largest sources of waste.
  • We've been impressed with the potential for the adoption of circular construction solutions.
  • The global recycled and upcycled material procurement space is expected to grow from €110 billion in 2020 to €193 billion in 2025.

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How We Think About Impact

As impact investors, our goal is to back businesses set to build solutions that, if successful, present an attractive financial opportunity, whilst addressing the widely understood social and environmental problems society is currently facing.

Within impact, climate is clearly an area we're most interested in, given the ubiquity of the problem, and how materially it can change the lives of everyone on earth. For that same reason, the Total Addressable Market for climate solutions is so large that it also implies significant opportunities for financial returns.

The problem we often have is, where should we start looking for investment opportunities with a sustainable angle?

A good screen for where real positive impact can be achieved has been put together by the Drawdown Project, which does the incredibly difficult job of quantifying the potential emissions reductions by industry groups.

Consider this:

  • Global electricity generation and utilization screens as the industry with the largest opportunity to reduce emissions, with a potential cumulative reduction as large as 200-440 gigatonnes of carbon emissions over the next three decades.
  • This is c. 30%-77% of the estimated 570-690 gigatonnes we need to cumulatively reduce over that period of time to reach carbon neutrality… so it's fair to say that electricity generation and utilization matters, and that's why so many green transition projects focus on that.
  • This hyper-focus on energy has turned it into a chaotic market, where many competitors fight for similar innovation and customers (a great thing to drive scalable impact at competitive levels). However, that makes the second part of our mandate as impact investors (generating a financial return) a little bit harder.
  • That's why we've recently started looking into solutions for Construction, which, while slightly less material than electricity, still has the potential to cumulatively reduce CO2 emissions by 74-141 gigatonnes between 2020 and 2050.