Fifth Wall, a Los Angeles-based venture capital group, has closed a half-billion-dollar fund to decarbonize the property industry. The new money brings the groupâs total managed investments to just north of $3 billion. It will be used to âinvest in anything and everything to decarbonize the real estate industry,â says Brendan Wallace, co-founder and managing partner at Fifth Wall.
The real estate industry is vast, and its contribution to climate change is well documented. A recent McKinsey study estimates â[r]eal estate drives approximately 39 percent of total global emissions.â Transportation, by comparison, is responsible for around 27%.
âIt's the single biggest lever the world can turn on mitigating climate change,â says Wallace. âHowever, as a category, it's pretty systemically under-invested in from climate venture capital funds. âOnly about 6%, historically, of climate venture capital has gone into real estate-related technologies.â
Fifth Wall wants to change that by bringing together some of the biggest real estate ownersânames like Marriot, Hilton and British Landâand investing their money into technologies that will help decarbonize the industry.
Fifth Wallâs portfolio includes everything from companies that make more efficient HVAC motors to carbon negative cement. The group also has financial stakes in heat pump and green hydrogen companies. Thereâs software of all sorts to invest in: regulatory compliance, fintech and industrial internet of things (IoT) technology that can support a real estate and construction economy that tracks carbon.
Wallace says the sheer scope of the real estate market combined with new interest in climate conscious investments helped create a demand for new fintech products that can track emissions and provide financial products that bake carbon costs into savings. âThe U.S. commercial and residential real estate market is bigger than the U.S. stock market. It's the single biggest capital market on Earth,â says Wallace. âThe allocators to that market are overwhelmingly saying âWe will preferentially deploy capital to low or no carbon footprint real estate.â So THE cost of capital has dramatically changed for lower carbon footprint real estate.â
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