Fifth Wall is the world’s largest venture capital fund focused on technology for the built environment. Second, it is carefully charting a course through very choppy waters in the emerging property technology industry. The firm has more than $3 billion of capital under management. Just recently, it raised $625 million via its initial public offering and experienced a solid 42% first day jump in its shares on debut on the Nasdaq. Brendan Wallace, co-founder and CEO of Fifth Wall, knows how hard the industry is shaking. In particular, he asks the hard questions about where we are on sustainability and climate investments.
Wallace wants you to feel the real estate industry’s tremendous impact on the environment. Yet he says that it’s responsible for 40% of carbon emissions. This alarming figure highlights the time-sensitivity of action needed in decarbonizing this sector. He notes a troubling trend where many real estate owners are deprioritizing sustainability initiatives, decarbonization efforts, and environmental, social, and governance (ESG) practices.
“My view is the real estate industry is still responsible for 40% of carbon emissions,” Wallace remarked. “It’s still this industry that has shirked its responsibility for years, and it’s going to cost a lot to decarbonize. It’s a lot of money, and capital is going to flow into that space … which is one of the reasons why we’re still deploying capital because we’re the only ones.”
Wallace’s comments come as the property technology industry has been rocked by tumult. Some of our largest climate funds are struggling to attract the capital they need. At the same time, investor sentiment is turning more pessimistic on climate-friendly prop tech investments.
I’d say we just lived through probably the most challenging three years that certainly I’ve ever experienced, Wallace reflected on the recent market conditions. He noted what seemed like an unprecedented wave of destruction of enterprise value across the entire prop tech landscape from 2022-2024. He pointed to a “return to value creation” over the last 15 months.
This duality reflects the broader challenges and opportunities facing Fifth Wall as it continues to deploy capital in the property tech space. The firm has had an active practice in supporting emerging companies in this space. We’re tracking their cool new unicorns such as Juniper Square and Bilt. Significantly, Bilt raised $250 million in a funding round in July, giving the company a $10.75 billion valuation.
The Biden administration’s strong support for decarbonizing real estate and a strong regulatory state have contributed to the reality. With billions of dollars allocated for public funding towards sustainability initiatives, there exists potential for innovation and growth within property technology.
So long as real estate professionals are committed to the values of sustainability and collaboration, Wallace is hopeful about the future. Most importantly, he believes that regardless of these challenges, tremendous investment opportunities still exist. He knows the road ahead will have bumps. In any case, the new green deal is coming because the urgent need for decarbonization will drive billions of investments into sustainable technologies.