We need to get from ESG to ISO

Please tell us about Pi Labs and what you do

I am pleased to have teamed up with Pi Labs, the pioneering prop tech venture capital group led by Faisal Butt, to join its joint venture partners panel to provide strategic ESG advice across its 50-company portfolio.

The ethos of my work has been to help clients to treat energy as a strategy through a decision-making framework which embeds environmental, social and governance investments into corporate strategy. This sits in line with Pi Labs strategy to identify and invest in technologies that have the potential to transform the built environment.

Some corporates fail to understand that the ESG strategy, which they have proudly created, can still leave them exposed to climate risks: we protect against that happening. I am now bringing my knowledge and expertise to Pi Labs, as they are focused on investing in technologies to find solutions and implement more sustainable outcomes for the real estate industry, which is a defining issue of our time.

Who do you advise and what is their traditional approach to energy?

For over a decade, working at The Jia Group, I’ve worked with executives in retail, healthcare, higher education and even the utilities worlds to examine how they use energy. We often help them to save money, in particular reducing their exposure to volatile pricing. This is reflected in my role as Venture Partner at Pi Labs, where there is an entire ecosystem of mentors, experts and start-ups all focused on innovation to solve traditional approaches to energy and sustainability.

At Pi Labs, as we look to identify tech solutions which can address the significant challenges related to ESG, we need to focus on changing the narrative around energy use. It is not about bill management – it’s about taking a bottom-up or grassroots approach to how they use energy in the first place.

There is so much that can be done. At most corporates everyone thinks energy is someone else’s responsibility but what actually works best is a collective effort. When energy and sustainability use is tackled effectively it can make a 10%-15% difference to a company’s profit and loss. This is why identifying proptech solutions that tackle environmental issues is hugely important. 20% of Pi Labs’ portfolio work directly tackles ESG issues, with investments into proptech companies like Switchee, 720 Degrees and QFlow, which are solving for energy consumption, carbon emissions and environmental risk.

What do you tell corporates to do?

The first thing I ask is “what’s broken?”. Old and broken equipment is such a drag on most companies’ energy use: you don’t keep a fridge for 10 years so why keep equipment which is out of date and costing you money as well?

Air conditioning, boilers, heat pumps, water towers: it’s not uncommon for companies to want to delay a capital outlay, but by delaying that outlay the problem gets worse and the costs rise as you spend money on labour to fix it.

Instead of replacing broken equipment you want to be ahead of the game. Energy efficiency and sustainability is about continuous improvement – it’s about everyone working holistically and doing more with less. That is why proptech is so essential. Innovative tech solutions have an important role to play in both global conservations, and the real estate industry’s response to social and environmental impacts which are at the forefront of most businesses agendas. For example, Pi Labs’ portfolio company, Demand Logic, has developed a predictive maintenance technology which alerts you to building equipment that requires updating before it breaks down. 

How are investors reacting to energy consumption right now? 

Investors are turning their focus to ESG, there is certainly a lot more attention from the financial sector: I tell them that we need to get from ESG to ISO – meaning that we need clearly established standards for measurement of environmental, sustainability and governance performance.

According to estimates from the World Economic Forum, the industry consumes 41% of global energy annually and accounts for 20% of international carbon emissions. Pi Labs, which is the most established and most active proptech VC in Europe, made an early move into ESG as an area of focus, as the proptech sector started to produce disruptive technologies which could instigate real change. Responsible investing is a central part of the company’s ethos and has been one of the attractions for institutional real estate investors investing into Pi Labs Fund 3.

More broadly, we’re seeing that money is being invested into ESG – now we need to channel that money into improving energy use on the ground. For example, there will be a huge amount of retrofitting going on to adapt to the impact of the coronavirus – for example, creating more outside space at buildings.
There has been a boom in green technologies. It is our role to identify which are going to be successful and help to nurture them, whilst educating the real estate industry on the short and long-term benefits of tech innovation in ESG. Investing into companies at an earlier stage allows us to help start-ups to deliver on practical outcomes which will help asset owners be a part of building a more sustainable world.

What will be the wider impacts of the pandemic?

In Phoenix people are already talking about converting empty three-or four-bedroom houses into suburban co-working spaces, allowing more people to walk to work, again saving energy.

There will be more tolerance of different working styles: instead of trying to fit everyone into the same 40-hour working week box, people will find out what’s suitable for them.

Ultimately, are we willing to give up our daily commute to maintain the climate remediation we have begun to achieve during the pandemic?