It just announced half a billion dollars in pledges to close the inaugural Climate Fund, which launched with $116 million in August last year. It is the largest private fund formed specifically to decarbonize the real estate industry, according to the company.
Nearly 40% of global carbon dioxide emissions come from real estate, according to the United Nations Environment Program Funding Initiative. About 70% is produced by construction processes, the rest comes from the construction process. Given that most of the real estate is already in place, it is difficult to achieve the net zero emissions target.
The fund aims to invest in software and hardware, renewable energy, energy storage, smart buildings and carbon sequestration technologies.
said Brendan Wallace, co-founder and managing partner of Fifth Wall. He stressed that the fund then works with those companies to accelerate their growth.
“We have some of the largest property owners, operators and developers as LP (limited partners) in our fund, so with these relationships we can help grow these early-stage tech companies, and open up these distribution lanes for them, where we basically have our biggest clients like LP.”
These partners are some of the biggest names in real estate, from single-family rental developers and operators to the hospitality industry. They include American Homes 4 Rent, which builds and operates rental homes and communities in 37 housing markets in the United States.
“The investment for us is relatively small, but the access to a number of small tech companies, as well as environmental companies all looking to improve single-family rentals is what really interests us about the opportunities. We have a lot of rooftops,” said David Singlin, CEO of American Homes4 Rent: “A lot of energy consumption.” “From a marketing standpoint, our residents are usually those, millennials who really appreciate this.”
For real estate companies, the return on investment is straightforward: they are improving their own business.
“But financial investors and institutional investors also recognize that this is one of the biggest opportunities,” Wallace said. “It’s an investment opportunity for generations, because, unlike 20 years ago, this is now imminent, real estate companies have to decarbonise.”
“It’s about to become a retrofit industry,” Wallace said, who admits his half-billion-dollar fund is just a drop in the sea against what he says will be $18 trillion spent to decarbonize commercial buildings alone, not to mention homes and infrastructure.
What he calls “shocking” is that so little investment capital is used in climate technology today.
“Historically, only about 6% of all climate tech venture capital has been used in tech to decarbonize real estate. So it’s kind of systematically underfunded in traditional venture capital markets,” he said.
Other limited partners include BBVA, British Land, Camden Property Trust, CBRE, Cosan, The Durst Organization, Equity Residential, Hilton, Host Hotels & Resorts, Hudson Pacific Properties, Invitation Homes, Ivanhoe Cambridge and Kimco Realty Corp. and Lineage Ventures, MGM Resorts, NZ Super Fund, Osgoode Properties and UDR.
The fund has already invested in several technology companies, including Assembly OSM, Brimstone, Clarity AI, Electric Hydrogen, Icon, Sealed, Span, Turntide Technologies and Wildcat Discovery Technologies, according to Fifth Wall.