PwC is striving to align ESG and digital worlds to improve the flow and collection of data. By Richard Betts.
Technology, digital transformation and ESG imperatives are colliding in a fast-changing world that is seeing start-ups taking a lead in charting a path to the future. Real Asset Impact asked Thomas Veith, partner and leader of the real estate/real assets team at PwC Germany, what the future might look like.
What trends are we seeing in digitisation and how does that play into the transformation side?
The key point is that, over the past few years, we have seen in the real estate industry that our business is still not as digitised as other businesses, if you compare it with the banking and the insurance sectors. We have to definitely change something because margins are getting smaller, the markets are getting a bit more tricky and, most of all, regulatory pressure is increasing. For example, ESG regulation in the EU and globally triggers the need for data, and industry players and the stakeholders are asking questions about CO2 footprint or ESG compliance.
The issue we are facing is that we just don’t have the data available. We started to think about who might provide solutions to this problem, which is growing. That’s why we cooperated with Builtworld and put together the Tech for Impact Map. ESG is really a catalyst for digital transformation.
In terms of the companies that you’re picking up and the venture capital, what different types of capital are you seeing that are helping to drive these businesses forward?
We started to think about what might be the interesting points, or you could call them the pain points the industry sees around digitisation and ESG, which is why we structured the Tech for Impact Map in five categories: analytics and research, sustainable building, asset management, ESG reporting and smart cities. We then identified the key start-ups globally focusing on these different topics. We picked out the top 100 that we see as the most positive or with the best outlook.
PwC’s Tech for Impact Map lists 100 companies providing tech solutions in the ESG sphere. It is divided into five categories and is aimed at accelerating data capture and digitisation of the built environment
We published the map in October for ExpoReal and that was really interesting. As to venture capital, all these start-ups of course are keen to find investors to support their growth. In the past we have seen a clear trend in the US and also in Asia, which have longstanding venture capital cultures, to support start-ups. Over the last couple of years we have seen that more and more European and German investors are also focusing on venture capital financing and supporting these start-ups in their growth phase.
How important is supporting ESG and social impact as well?
It’s pretty important, as we are all on a learning curve and we are in the middle of a journey of ESG transformation. We are finding that it is a complex topic. We see this in our projects and in our daily discussions with clients; the fact is there isn’t one solution for all the ESG and digital questions we have. That’s why I think we had to put together such a map and bring together different smart solutions to solve the complex problem we see in combining ESG and digital ecosystems.
Where next? Going forward, how do you see it developing?
I think it’s developing fast and growing fast as more and more stakeholders and asset owners have digital transformation and ESG transformation on their agenda. The demand is growing all the time and I think that we will see a fast-growing start-up scene, especially around ESG. But in general the technical or digital supporters for our industry will develop pretty fast.
‘The demand is growing all the time and I think that we will see a fast-growing start-up scene, especially around ESG.’
Thomas Veith, PwC
Of course it’s a very competitive field and we know it is usual in the start-up scene for nine out of 10 companies not to survive. But even now we are seeing the first consolidation phases, where different start-ups team up to buy each other, so there’s a consolidation phase currently going on. This is a good thing to form strong technological partners in Continental Europe.
That’s something I see happening already this year, and we have seen some transactions. But it’s also something we will see in the medium term: a consolidation trend and the emergence of some strong players that support us on the digital as well on the ESG transformation side.
You have a certain number of companies that you have registered for the first tech map. Do you see the number of companies beginning to grow exponentially as the focus on this area grows?
Definitely. You can see at start-up fairs and institutional events that it’s a fast-growing sector. As I mentioned, there is consolidation going on but, most importantly, more and more smart ideas are coming up as the regulation develops. The various stakeholders are asking more and more questions, so we might need new solutions for the new questions that are coming up.
That’s what the ESG journey is like. We are in the middle of the journey and we know there will be changes and different issues coming up all the time. The initial questions were all about the CO2 footprint globally, but now we see more questions about the circular economy.
That’s why we have the sustainable building category in our Tech Map: it’s a fast-growing universe of start-ups with significant capital needs, but they also offer a lot of opportunities to potentially invest. This potential is what is driving this change in mentality, even for German institutional investors who are usually pretty conservative, to consider venture capital investments.