Over the past decade, the move toward green building and sustainable construction has not just excited the environmentally conscious; it has excited investors as well.
Indeed, around the world, according to a report published last month by US research firm Lux Research, venture capitalists have pumped more than $4 billion worth of investment into environmentally friendly buildings since 2000.
Indeed, the research firm says that time, it has tracked 332 venture capital transactions which it identified as being within the green building space, amounting to a total value of $4.06 billion and involving 160 companies.
Ryan Castilloux, a research analyst at Lux, says an increasing proportion of green building venture capital (VC) funding is going into later-stage investments, indicating what the research firm refers to as a ‘maturation’ of the first wave of green building start-up companies.
Meanwhile, he says, new opportunities are emerging in integrated design, on-site generation, energy services, the advanced building envelope, and low-carbon cement and concrete.
“Early VC investors are looking for exits for the first wave of successful green buildings start-ups and the seeds of the next crop are being sown in on-site generation and sustainable materials” Castilloux says.
Essentially, venture capital is funding provided to start-up companies with high potential. Usually such funding is provided at the early stages, but VC funding is also common in later stages as young companies seek money to ramp up operations.
That such significant volumes of money have been raised by companies which operate in the green building space indicates strong investor appetite for green building assets.
So what does the future hold?
In its report findings, Lux indicates three key areas of growth:
- Integrated design. Lux believes companies which support what it refers to as ‘integrated design’ will enjoy strong growth as many countries, especially in the European Union, strive to achieve aggressive energy targets.
- On site generation. Describing this area as a ‘hotbed’ for investment, Lux says companies involved with on-site generation materials and systems are raking in investment dollars, with technologies such as micro-combined heat and power (micro-CHP) generators set to play a vital role in the global push for Net Zero Energy Buildings.
- Mergers and acquisitions. Lax believes that merger and acquisition activity involving firms operating in the green building space will surge, with a range of start-ups ripe for acquisition. Already, Lax says, there were four prominent acquisitions in this area in the first half of this year.