Stating the obvious: we have been living on credit for decades. Since 1960 the per capita CO2 emissions have been growing by 55%. The more prosperity we have been attaining, the more CO2 we have been emitting. An increase in GDP per capita is highly correlated with an increase in CO2 emissions per capita. The reasons are diverse: our individual mobility preferences and our food habits are just two examples.
And: not only have we seen a CO2 per capita increase but also a dramatic increase in the world’s population. The global population grew from 3bn in 1960 to today’s 7.5bn. And: until 2060 the world’s population is expected to keep growing to 10bn.
While the consequences of these developments have been abstract to many people in recent years, they are now becoming unpleasantly tangible. According to a YouGov study, 50%+ of people in 28 countries fear that climate change will severely harm economies, destroy cities and even start wars.
When looking for ways to achieve the targets set in the Paris Agreement, one sector is often overlooked: construction.Turning construction carbon-neutral is, however, mission-critical.
1/ Generally speaking, construction impacts our climate in two ways: Firstly, the construction process itself directly affects CO2 emissions. Secondly, the amount of CO2 emitted during the operations phase of the building is to a varying degree predetermined within the pre-construction phase.
2/ And: The impact is significant. The construction industry accounts for 13% of global CO2 emissions per year. For example through the building materials we choose to build with or the supply chains we organize to deliver construction projects.
3/ And: During the operations phase of buildings, another 28% of global CO2 emissions are emitted per year. Given that buildings’ lifespans may range from 40 years to even 100 years, poor design choices made in the pre-construction phase can have a lasting impact on the buildings’ CO2 footprint.
4/ Ergo: Construction matters disproportionately. Through its direct or indirect levers mentioned in 1/ construction affects 41% of the yearly global CO2 emissions.
5/ And: There is no end in sight. A lot of CO2 emissions are still to come. An increasing population and increasing prosperity are expected to drive 230bn m2 of new construction within the next 40 years.
6/ Ergo: If we want to satisfy the demand for construction in a sustainable way, we will have to change the way we engineer, design, and build our buildings and infrastructure as fast as possible.
7/ But: Looking at the construction and mining industry, we do not see a whole lot of improvement. Compared to 1990, the construction industry became 23% less efficient. And: The mining industry became 30% less efficient compared to 2000. Looking at the R&D expenditures does not help either. Construction companies, building materials companies, and mining companies spent 3.8%, 1.6%, and 2% respectively of their yearly revenue on R&D. Software & computer services and health care equipment & services instead spent roughly 15% of their yearly revenue on R&D.
8/ But: While innovation is currently not coming from inside the industry, we see an increase of outside investments into the space. Venture Capital funding in construction rose by ~550% from $520mn in 2015 to $3.4bn in 2018.
9/ But: Despite this strong growth, the VC funding in construction starts at a relatively low level. The total VC funding into ConsumerTech, Mobility, and PropTech from 2000 to 2019 added up to $562bn, $191bn, and $48bn, respectively. Specifically looking at the VC funding into PropTech, there seems to be an imbalance, when directly comparing it to the impact of construction.
10/ Ergo: We still have a long way to go until we achieve a decarbonized construction sector. But: from our daily discussions with ventures our daily business, we can tell that things are starting to move. Start-ups that strive to improve the industry are founded everyday, large investors are forced to ramp up their investments in start-ups tackling climate issues, and even some governments have started to implement incentives for sustainable construction.
Interested why decarbonizing construction is easier said than done? Wait for our next post.
As always, credits go to the data wizards in our Foundamental Insights Group.