Technology to the rescue to deal with the ESG challenge

In order to innovate real estate companies need to have real time data, so they need technology and investment, delegates heard at Real Asset Media’s Transforming Real Estate briefing, which was held recently at PwC’s London headquarters.

Those who cannot develop or pay for their own tech systems will have to rely on others.

“There’s a lot happening in the field, from reporting platforms for investors to view and analyse ESG data to engineering solutions,” said Kingma Ma, head of UK, Proptech1 Ventures. “These are very technical subjects that require an understanding of the solutions that need to be adopted to create a more sustainable workplace. Leaders of companies should foster a culture of innovation and experimentation, using new tools to improve efficiency in their organisation and have a more sustainable output.”

Technology can allow you to analyse a property at every stage, from planning to construction to post-construction, and it can also provide hardware solutions, carbon capturing and longer-life batteries. What is needed is more information and better knowledge.

“We know there are technologies that will improve the sustainability of real assets, but we lack the basic understanding of renewable energy sources or battery management,” said Kingma. “Everyone knows what a solar panel is, but hardly anyone knows exactly what they are made of and how they work. Yet these are the crucially important and constantly evolving technologies that underpin green power.”

It is all the more important now that the huge increase in energy prices and the war in Ukraine have highlighted the need for energy independence and being less reliant on Russian supplies. Political and economic imperatives converge and this will drive sustainability, given the important role that renewables can play in reaching that energy independence goal.

“Energy efficiency will become even more of a key theme in real estate,” said Kingma.

There will be a focus on existing buildings and a need to evaluate what the best tech solutions are.

“We know that 90% of existing stock needs to be transformed, and that need creates a great opportunity,” said Thomas Veith, partner – leader real estate/real assets, PwC. “Luckily there are many start-ups focusing on transformation.”

As companies become aware of the important role that technology can play in helping them achieve their ESG objectives, some are joining forces, developing partnerships and sharing best practice.

“There is more collaboration between corporates now, along with start-ups,” said Kingma. “As a venture capital investor it’s very exciting because there are many opportunities to deploy capital. Venture capital can play a big role in delivering technologies that can improve ESG.”

The sector has made great strides in Europe recently and will continue to grow.

“In the last two or three years a venture capital culture has developed in mainland Europe, while before it was only in the UK”, said Veith. “There’s a great potential to grow the venture capital industry in the real estate sector”.

Europe’s leadership role will deliver results, said Kingma: “Europe will catch up with the US, because it has the best framework and the best market awareness.”

Proptech1 Ventures has a clear investment strategy following three key themes, he said: the first is digitalisation, which is a big trend; the second is customisation, the crucial ability to adapt to changing demand; and the third is sustainability.

“There is a lot going on in the field, but we look for returns-differentiating technologies,” said Kingma. “We are moving beyond collecting data to hardware solutions, which are very exciting and will scale up significantly.”