Built Environment – The Climate Elephant

Currently 34 percent of global annual carbon emissions and a quarter of greenhouse-gas (GHG) emissions flow from the built environment.[1] This encompasses emissions from the full building cycle – the manufacturing of building materials, construction, operating the buildings and eventual demolition.[2] Consequently, reaching global and European climate targets is nearly impossible if the built environment does not decarbonise rapidly.[3]  

But this is not just a mere climate issue. Financially and socially, the stakes are equally high. The global value-at-risk (VaR) of commercial and residential real estate amounts to $21 billion.[4] With vast amounts of capital – commercial and individual – tied up in buildings, decreasing the risk exposure of these assets is an important driver for decarbonizing the real estate sector.  

The driver for decarbonization is thus evident, the construction and real estate industry are, however a traditional and generally tough industry to put in motion. In this blog, we dive into the barriers holding the sector back and discuss the technologies that are starting to break them down. Technologies that make us excited about the future of this industry.  

Retrofitting  

80% of the building stock for 2050 has been built already today. Hence, meeting climate targets in this industry does not only require building innovative new buildings. It is also about transforming the current stock. Buildings that are currently operative have to be retrofitted to enable sufficient decarbonization. This entails creating more energy-efficient buildings as well as adapting the building stock to enable further electrification. However, the retrofitting space has proven highly tailwind sensitive and driven by subsidies and rebates over the last years. While retrofitting solutions were booming in 22-23, a shift in the political landscape and more uncertainty surrounding climate initiatives have stalled tailwinds recently. The urgency for retrofitting is nevertheless merely growing, and hence solutions that create both economic and environmental value have a vast and growing market to conquer. 

This is where we see an opportunity. At Endeit, we invest in software-driven companies that can accelerate and scale retrofitting. Software can bring the necessary increase in productivity and efficiency needed to ramp up the rate at which our building stock can be retrofitted. According to the World Economic Forum (WEF), the lack of effective collaboration between architects, contractors, and other project stakeholders is one of the largest obstacles for a (net) zero-carbon built environment.[5] Companies like Spruce, Smalt, Reonic, OpusFlow and Eturnity are addressing this through digital platforms that streamline collaboration and/or remove the inefficiencies associated with lack of digitalization in the retrofit space.  

Yet, even with efficient installers and sufficient government incentives, the real decarbonization decisions lie with real estate owners.  They decide if, how, and when to retrofit. To make this decision-making process simpler and data-driven, companies as 42Watt, Setle, Furbnow and Purpose Green leverage building data to provide data-driven retrofitting/renovation advice and offer platforms from which this process can be orchestrated. E.g. Purpose Green provides an end-to-end energy retrofit platform for property owners and asset managers. The entire retrofitting cycle can be managed via the platform: energy assessments, tailored retrofitting plans, subsidy application and long-term ESG management.  

Image 1. Built Environment Market Map

Energy Management

While retrofitting focuses on the physical upgrades required to decarbonize buildings, energy management solutions tackle the software layer – optimizing and managing the energy consumption of buildings. The energy crisis of ’21-‘23, triggered by the economic rebound following the COVID-19 pandemic and the subsequent Russian invasion of Ukraine, clearly exposed the pitfalls of increased electrification: (potential) volatility of energy prices. Intra-day and longer-term. This spike in volatility caused a more rapid adoption of Energy Management Systems (EMS), i.e., software (sometimes combined with hardware) tools that monitor and provide insight into energy usage and (often) optimize when and how energy from different energy sources is consumed. Software solutions that allow companies to use energy at the right time can provide substantial cost savings, 

Especially for energy-intensive companies and SMBs with a lack of energy strategies in place. Companies like Aedifion, Greenfusion, Next Sense, R8 Tech, Myrspoven and Enersee provide platforms that allow building operators to shift energy use to off-peak hours, balance different energy sources, and reduce peak demand charges. 

Beyond cost savings, EMS platforms also help companies comply with and stay ahead of ESG regulations, which increasingly require real estate owners to measure and report the environmental footprint of their assets. Adoption of software solutions that provide the required data insights can thus kill two birds with one stone, which bears real economic value. Despite some stabilization in energy prices post energy crisis, which slowed down the rapid adaptation of energy management tools slightly, price volatilities remain. Driven by further electrification, grid pressures and geopolitical instabilities.[6] We believe this underlines a long-term structural need for intelligent energy management. At Endeit, we therefore see energy management solutions as critical enablers of the transition to a low-carbon, high-efficiency built environment—an area where software innovation will continue to unlock value. 

Our vision and conclusion  

The decarbonization of the built environment is not just a necessity – it’s a massive opportunity for innovation, impact, and long-term value creation. Powerful software tools are required to enable this transition. Many of the technologies in this space are still in their infancy and have great growth potential. We are excited to assist founders with developing go-to-market strategies, reaching new customer groups and expanding/accelerating their business. 

SOURCES 

[1] UN Environment Programme – ‘Global Status Report for Buildings and Construction 2024/2025’, link; World Economic Forum – ‘This is the next hurdle in the construction industry’s race to net-zero’, link.
[2] McKinsey & Company – ‘Climate risk and the opportunity for real estate’, link; Noa VC – ‘State of Built World Tech 2024’, link.
[3] McKinsey & Company – ‘Building value by decarbonizing the built environment’, link.
[4] Buildings Performance Institute Europe (BPIE) – ‘On the way to a Climate-Neutral Europe’, link.
[5] World Economic Forum –  ‘This is the next hurdle in the construction industry’s race to net-zero’, link.
[6] McKinsey & Company, ‘Global Energy Perspective 2024’, link.