‘It’s going to cost roughly $50T to decarbonize the U.S. economy’: Fifth Wall Founder

Brendan Wallace, Fifth Wall Founder, joins Yahoo Finance to discuss the Fifth Wall Climate Tech Fund’s goal to decarbonize the built world and building real estate for a better climate.

Video transcript

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AKIKO FUJITA: VC-backed climate tech funds have raised more than $14 billion so far this year, according to data from PitchBook. The number of climate funds closed this year have surpassed the total for the last five years combined. Our next guest has added roughly $500 million to that total, raising funds for property tech VC firm Fifth Wall and its climate-focused fund. Let's bring in Brendan Wallace, the founder of Fifth Wall. And, Brendan, of course, you're announcing that you've raised $140 million as part of that $500 million fund. Talk to me about the interest level that has really piqued over the last year or so as a result of climate coming to the forefront.

BRENDAN WALLACE: So I think the interest in climate tech is going to come from two things. One is just, it is going to cost roughly $50-- 5-0-- trillion to decarbonize the US economy. So when you look at an economic level, it is a staggering opportunity. And so I think it's unsurprising that you're seeing enormous amounts of capital mobilizing to invest against that.

I think if you look more specifically at where we're focused, we're focused on the real estate industry and its contribution to climate change. The real estate industry is responsible for 13% of US GDP, but 40% of CO2 emissions. Obviously, so its impact is outside. So correspondingly, the real estate industry needs to invest an enormous amount in decarbonizing itself.

So we've built our fund, the Fifth Wall climate tech fund, to focus on technologies that can decarbonize the built world, so real estate assets, the places we live and work and the physical spaces around us. And what we're announcing is that today, we've raised $140 of the $500 that we're targeting, and we've raised that from some of the largest owners and operators and developers of real estate in the US and globally. So I think it's a macro trend for the whole economy, but it's particularly relevant for the real estate industry, given its impact in climate change.

AKIKO FUJITA: How do you break down the real estate industry when you look at the carbon footprint? I mean, you can talk anywhere from the construction element of these buildings, how they're built, how they're operated. How do you look at every one of those slices when you think about the investments that are necessary to get to that low carbon future?

BRENDAN WALLACE: I mean, it's a great question, right, because the space is so expansive in terms of how you can decarbonize the real estate industry. Obviously, you have operational carbon, right, which is the cost of just operating real estate assets and the energy required to do so. And so there's solutions that are, you know, building systems technology and alternative energy on site and on site battery that are particularly important to reducing the energy consumption of the existing assets we have today.

At the same time, you can focus on embodied carbon, which is every time you build a building, right, there's an enormous amount of carbon embodied in actually constructing it and getting the materials to that site. And so today, what we're seeing is a lot of innovation in and around just smart and kind of carbon sequestering and decarbonizing materials, so just materials that can reduce the embodied carbon of real estate assets.

And so I think as regulators and as capital markets and as the public comes to focus on the real estate industry, they're looking at both of these two vectors to say, how does the real estate industry reduce its energy consumption as a whole, but also, how do we build buildings more efficiently from a carbon perspective? Because everyone is starting to recognize the real estate industry's, you know, significant contribution to CO2 emissions, both at an operational level but also at an embodied level.

AKIKO FUJITA: You know, obviously, at least, I should say, in the VC space, climate tech is something that investors have been eyeing for some time. But now you've got an administration in the White House who is not just talking about the issue at hand, but the ways innovation can help with this transition to a greener future. A climate innovation fund being discussed under President Biden as well. As somebody who's on the private side, how important is it to have the public, the government side, invested in this space as well? Does that increase the interest in the space? I mean, have you seen a change as a result?

BRENDAN WALLACE: I think it absolutely does. I mean, to be clear, to solve, right, this kind of generational challenge, we can't just rely on the public sector. I think we have to rely both on the public sector and the private sector. But at the same time, you know, the last administration, the Trump administration, was probably one of the most environmentally regressive administrations. As part of that administration, the US left the Paris Agreement. Now, Biden's administration, one of its first acts was to put the US right back in it, sending a very clear signal that this is a policy priority for the Biden administration.

Now, when you talk about kind of climate standards and kind of CO2 emissions globally, you are, of course, dealing with a collective action problem globally, meaning it's not just incumbent on the US to take initiative, it's incumbent on the world to act together and in concert to solve this. And so I think one of the things that's exciting is that with the US re-entering the Paris Agreement, it sends a very strong signal for the US commitment obviously as a world power and how important climate change and policy and regulation around fighting climate change is to the US, [PHONE RINGING] but it does so in the context of-- did I lose you?

AKIKO FUJITA: No, I'm still here.

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BRENDAN WALLACE: It does so in the context of kind of a global cooperative action to drive kind of decarbonizing the global economy.

AKIKO FUJITA: All right, Brendan Wallace-- I'm going to let you get to that call-- founder of Fifth Wall, it's good to talk to you today. Appreciate the time.