HomeReal Estate NewsCommercialAnalysis: ESG monitoring leads to surge in proptech VC funding

Analysis: ESG monitoring leads to surge in proptech VC funding

Property technology, or proptech, startup companies have seen an influx of venture capital, due to an increase in tech that can track carbon emissions and decarbonize buildings, GlobeSt. reports. The recent scale is due to new Security and Exchange Commission (SEC) rules and Environmental, Social and Governance (ESG) disclosures.

A record $4 billion in VC funding was steered to proptech during the first quarter of 2022, per a report from investment bank Keefe, Bruyette & Woods. A majority of the capital is being put toward ESG-focused startup companies.

The SEC proposed a rule in March that would require commission-registered companies to include climate-related disclosures in their registration statements and periodic reports to investors. These reports are to include information about climate-related risks that could possibly impact their businesses. The required information also would include a disclosure about the company’s greenhouse gas emissions because they’ve “become a commonly used metric to assess a registrant’s exposure to such risks,” the commission said in its release.

Buildings, regardless of type, are expected to produce as much as 40 percent of global greenhouse gas emissions, GlobeSt. reports. As a result, cities are beginning to require commercial real estate owners and landlords to track and decrease their carbon emissions as they convert to renewable energy. As these carbon-emission reduction requirements and SEC disclosure requirements approach, startups that specialize in these matters are becoming more attractive to VCs.

Proptech VC investments during the first quarter were up 41 percent compared to the amount raised during 4Q 2021 and 31 percent from the beginning of 2021. The uptick in VC proptech investments during the first quarter of this year is outpacing last year’s record of $11.7 billion in proptech VC funding, according to GlobeSt.

The proptech market remains active

The proptech arena is expanding and a number of major players are beginning to consolidate, GlobeSt. reports. A lot of early-stage ESG startups are for sale and about 60 merger and acquisition deals were announced during the first quarter. SmartRent bought maintenance and resident service software startup SightPlan in March for $135 million and smart home startup iQuue in January for $13 million.

Meanwhile, the fall of cryptocurrency has not hurt ESG monitoring startup companies that use blockchain. For example, Cleartrace is expanding a real-time monitoring system for energy use in buildings to help certify that ESG targets, including 100 percent renewable sources of electricity are met. The company’s blockchain platform matches a building’s energy output to a corresponding demand by monitoring power use in real time.

JPMorgan Chase plans to roll out Cleartrace’s platform to track and certify renewable energy use at its New York properties as part of a five-year plan to decarbonize the portfolio, according to GlobeSt. The bank will also work with Brookfield Renewable, an owner, operator and developer of renewable power in the U.S. and globally, which plans to harness the blockchain tech Cleartrace develops to track the hydropower generation it supplies to JPMorgan Chase in real time.

“By matching the instantaneous output of a facility to corresponding demand, the technology brings enhanced transparency and auditability to renewable power purchases, enabling authentication of the transaction,” Brookfield Renewable said in release.

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