Unsupported Browser

Our website has detected that you are using an outdated browser which might impact your browsing experience. We recommend using an up to date version of the browsers suggested below.

The environmental bill for our built infrastructure Joseph Friedland, Investment Analyst

Urbanisation has long been one of the most significant global trends, economically and socially. With that shift set to continue, there is now more recognition than ever that construction in major conurbations around the world comes with an environmental cost as well as a financial one. Technological advances in materials and systems as well as changes in planning regulations have helped to reduce environmental cost associated with construction. As regulations and standards continue to tighten, those advances must continue. The day-to-day environmental cost of our already-built cities must also be addressed. Here too, regulations and societal pressures will demand mitigating actions, with building owners turning to new technologies in refurbishment and monitoring.

Global Energy Consumption by Sector

Source: EIA

The good news is that a myriad of technologies that address these sources of demand exist today, and new technologies come to market each year. These will not only help in the fight against climate change, but may also provide investors with new opportunities.

In an effort to tackle heating, ventilation and air conditioning (HVAC) and embodied energy demand, there has been significant investment in ‘green’ building materials. Since 2016, demand for high-efficiency insulation and paneling has grown by 25%3, and the market for advanced windows has grown by over 50%4.

To date, the high cost of these materials has kept adoption low. In the US, for example, less than 10% of residential buildings5 and 50% of commercial buildings6 utilise high-efficiency materials. However, a market for low-embodied-energy building materials is beginning to take shape. Materials and chemical companies have developed several alternatives to high-carbon construction materials, such as cement, steel, and plastic cladding. It is a small market today as most products are only suitable for limited applications but it is growing rapidly.

Building Delivered Energy Consumption by Region

Source: EIA

Technological advancements and falling prices will allow for wider use of green building materials. Evident demand and the increasing applications for these materials should bring noteworthy growth opportunities for building material manufacturers like Kingspan, and speciality chemical companies such as Sika, both of which have already established themselves in this burgeoning market.

Joseph Friedland
Investment Analyst

Joseph is an investment analyst who joined Walter Scott in 2019 having interned at the firm in 2018. He holds a PgD in Ecological Economics from the University of Edinburgh and a BA in Environmental Science from Colorado College in the United States.

  1. World Green Building Council, Bringing Embodied Carbon Upfront
  2. U.S. Energy Information Administration, Global energy consumption driven by more electricity in residential, commercial buildings
  3. MarketsandMarkets, Building Thermal Insulation Market by Material (Glass Wool, Stone Wool, Polystyrene), Application (Flat Roof, Pitched Roof, External Wall, Internal Wall, Cavity Wall, Floor), Building Type (Residential, Non-residential) - Global Forecast to 2022
  4. MarketsandMarkets, Energy-efficient Windows Market by Glazing Type (Double, Double Low-e, Triple, and Triple Low-e), Component (Glass, Frame, and Hardware), Application (Replacement & Renovation and New Construction), End-use Sector, and Region - Global Forecast to 2026
  5. Cision, Ninety Percent of U.S. Homes Are Under Insulated
  6. U.S. Department of Energy Office of Scientific and Technical Information, The case for retrofitting building envelopes
  7. Grand View Research, LED Lighting Market Size, Share & Trends Analysis Report By End Use (Residential, Commercial, Industrial, Others), By Product (Lamps, Luminaires), By Application (Indoor, Outdoor), And Segment Forecasts, 2020 - 2027
  8. Ibid
  9. MATEC Web of Conferences, LED Lightbulbs as a Source of Electricity Saving in Buildings
  10. International Energy Agency, Air conditioning use emerges as one of the key drivers of global electricity-demand growth
  11. Cision, Smart Building Market to Reach USD 109.48 Billion by 2026; Rising Environmental Concerns to Contribute Healthy Growth, States Fortune Business Insights™

Important Information

This article is provided for general information purposes only.  The information provided in this article relating to stock examples should not be considered a recommendation to buy or sell any particular security. Any examples discussed are given in the context of the theme being explored.  The opinions expressed in this article accurately reflect the views of Walter Scott at this date, and whilst opinions stated are honestly held, no reliance should be placed on them when making investment decisions.



Carbon Conclusions

Climate and carbon are themes set to define the investment landscape for generations to come. As long-term investors, how do we ensure that portfolios are best positioned to benefit in this lower-carbon world?

Battery Storage

A lack of reliability and a mismatch between supply and demand are barriers to greater use of renewable energy. Could battery storage be the answer to this conundrum?

Electric Vehicles

The stars are aligning for electric vehicles, but investors will have to be careful in choosing the right companies to take advantage of investment opportunities that the growth in this sector affords.