Friday Letter: Climate tech investing resonates with real estate

A survey on the future of real estate investment in climate tech shows the 'industry is waking up' to the problems and sees the solutions as a differentiator, says Greg Smithies of Fifth Wall.

In Venture Capital Journal‘s recent story on climate tech investing, we reported on how the sector has gained momentum. The green rush is, in part, due to investors realizing the severity of climate change and how tech innovation can play a role to reduce its impact.

With the Biden administration re-entering the US into the Paris Agreement and releasing a broad infrastructure proposal that will take on climate change, investors in the sector are emboldened.

But even if VCs back innovative climate tech solutions, there’s no guarantee customers will adopt the tech in the broader real estate industry. Will real estate invest in renewable energy, building automation and IoT, efficient heating and cooling, as well as smart building technologies?

The answer appears to be yes. There are customers for climate tech. A new report by venture firm Fifth Wall in partnership with CREtech Climate and Urban Land Institute confirms that there is an upwards trajectory of spending on climate tech projected within the industry. The survey, conducted this year, assesses how the real estate industry is currently addressing climate change through its tech investments.

Among the findings in the report, 75 percent of the respondents said they have plans to increase their investment in climate tech over the coming years, and nearly two-thirds have on their teams a professional to oversee their climate, sustainability and ESG efforts. Among their priorities are lighting, heating and cooling and renewable energy.

The free report is available here.

I spoke about the report this week with Greg Smithies, a partner at Fifth Wall, one of the largest venture firms focused on real estate tech. Smithies late last year joined Fifth Wall to co-lead its fundraising efforts on its climate tech fund, which is reportedly targeted at about $200 million. That fund has already secured a commitment from Ivanhoé Cambridge, a Montreal-based real estate arm of Caisse de dépôt et placement du Québec.

Smithies said he was hardened to see the report’s results and that the real estate industry is aware of the problem.

“The real estate industry is waking up to what we’ve been pounding the table about for so long,” he said. “The real estate industry is aware of the problems and they see tech spending as a differentiator.”

Let me know what you think about climate tech. You can drop me a line at agoldfisher@buyoutsinsider.com, and I’m happy to chat.