Why it is necessary to decarbonise buildings
The built environment accounts for almost half of global emissions (41% of 2020 global CO2 emissions, split between construction and operational emissions (25%) and carbon emitted in the production of materials (16%)). Materials therefore need to be competitive in terms of both their embedded carbon content (ie CO2 emitted during the production process) and their ability to lower a building’s carbon output over its lifespan. This challenge requires significant innovation and change. To put the carbon of the built environment into perspective, roughly 90% of the built environment’s GHG emissions are equal to CO2 emissions from fuel consumption globally (according to McKinsey & company).
A focus on building materials
In this report we focus specifically on selected companies in the building materials vertical; we will look to return to the wider issue with a focus on other materials (steel and concrete) as well as the broader design challenges in a future report. We have had discussions with a number of the companies listed in this report, to learn about their ESG targets and strategies, and to gain insight into the importance of the issue for management. Our impression is that the issue is well respected by management, not only because of the need to decarbonise materials, but also due to the significant impact decarbonising will ultimately have on some production processes and the competitive landscape.
Investable opportunity
Investors have the potential to benefit significantly by allocating capital to companies at the forefront of decarbonising the built environment. Firms engaged in sustainable construction materials are positioned to capture outsized growth as regulatory, consumer and financial pressures converge around sustainability. These companies face expanding addressable markets, underpinned by government incentives (such as the UK’s £6.6bn commitment to retrofit homes by 2025), and also stand to benefit from a structural re-rating as ESG integration becomes mainstream in capital markets.
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