From apps to major equipment, cleantech and climate tech are ensuring a sustainable future by helping reduce carbon emissions and achieve other green goals.
Here’s why they’re emerging now—and what you need to know about investing in them for your properties.
What Are Cleantech and Climate Tech?
Definitions of both types of technology vary, but cleantech is generally used as a broader umbrella term for green technologies, whereas climate tech focuses specifically on technologies that focus on reducing climate impacts.
“These terms are often used interchangeably, and you will hear different definitions,” explained David Schwartz, director of innovation, cleantech, at PARC. PARC is part of SRI International, an independent, nonprofit research institute. “To me, cleantech refers broadly to technologies that mitigate environmental degradation and includes goals such as clean water that are arguably not directly related to climate. Climate tech more specifically relates to reducing greenhouse gas emissions and addressing climate change.”
A McKinsey report suggests that 10 categories of climate tech are critical for the world to reach a net zero emissions level:
- Renewable energy generation
- Batteries and energy storage
- The circular economy (including such technologies as battery recycling, heat recovery and plastics recycling)
- Building technologies (such as geothermal heating, heat pumps and electric equipment)
- Industrial process innovation (electrifying heat sources, green methods of producing steel and cement)
- Hydrogen (electrolyzers, fuel cells and methane pyrolysis)
- Sustainable fuels
- Nature-based solutions (monitoring/verification for forests, peatlands and mangroves)
- Carbon removal, capture and storage
- Agriculture and food innovations (precision agriculture, crop preservation, regenerative technology)
Many of these categories directly impact the built environment, including renewables, energy storage, the circular economy, sustainable fuels and, of course, building technologies.
Why Are These Technologies Emerging?
Cleantech and climate tech manufacturers are responding to a cultural shift. Concern over climate change is growing, and so is legislation aimed at addressing the issue, such as New York City’s Local Law 97, said Jeff Hendler, CEO of climate tech developer Logical Buildings.
“There’s also activism in the market,” Hendler said. “For example, the world of ESG, where you have large funds that invest in companies demanding that companies who want to be part of those funds have to show what they’re implementing in their own corporate policies to improve the climate. That’s somewhat forcing boards of publicly traded companies to hire a staff to benchmark and monitor how we achieve those requirements.”
Technology plays an essential role in helping these companies achieve their goals, Hendler added. Reducing energy consumption and other sources of carbon starts with measuring emissions, then finding ways to reduce them.
“Already, we see the positive impact of technologies such as electric vehicles, photovoltaics, wind turbines and smart thermostats, which are reducing energy consumption and facilitating the shift away from fossil fuels,” said Schwartz, adding that climate tech has two main goals:
- Developing innovative solutions. “From materials and processes for carbon dioxide removal to techniques for finding, extracting and recycling critical rare elements, to optimized industrial and building controls, numerous new innovations are needed,” Schwartz said.
- Making solutions low-cost. “Companies want to decarbonize, but they need to remain competitive,” Schwartz said. “Individuals understand their role in addressing the problem, but they too live on a budget. Governments are reluctant to mandate carbon reduction when there are no accessible, affordable options for compliance. Technologists can help address these concerns by rethinking expensive approaches and developing new manufacturing techniques.”
Identifying Smart Investments for Commercial Real Estate
Any cleantech or climate tech solution will require a capital investment, which can make building owners nervous about adopting new solutions, Schwartz observed: “The level of confidence in a system increases as it is used and proven,” he said. “That’s true not just for owners, but for designers and installers too.”
However, adopting the right technologies can potentially bring building owners a host of benefits, from energy savings (and associated lower costs) to more comfortable spaces and higher rents from people who are willing to pay more for spaces with sustainable features.
Investing in climate technologies can also help building owners and managers avoid financial penalties linked to carbon compliance in places that have adopted those penalties, Hendler said, and buildings can also earn grid service revenue from utility demand response programs if they invest in technologies that make participation possible.
“In the current environment, there is also a great opportunity in financial incentives,” Schwartz added. “Utilities, municipalities, states, and the federal government offer tax credits, rebates, loans and other instruments to encourage adoption of climate-friendly technologies. Some of these are large enough to materially impact the cost of a solution. However, the incentives change frequently and often have limited overall funding. This should be considered when optimizing the timing of a purchase.”
Logical Buildings offers two tools targeted at making demand response easier. GridRewards is a free app for residential, commercial and industrial tenants that tells them when and how to reduce energy usage and rewards them with cash payments. SmartKitAI, an app for building operators, leverages secure cloud integration with utility smart meters, building controls and IoT networks to create new layers of energy savings and revenue and reward building operators for managing energy, water and carbon usage more efficiently.
As a research firm, PARC works to identify promising technologies and make them more practical for widespread use. “We identify the intersection between what’s needed and what’s possible, taking risks in early-stage concepts that have the potential for significant impact if successful,” Schwartz said. The organization is currently working on a novel approach to building controls that enables rapid, cost-effective creation of building energy models. The models enable adaptive building controls that lead to 20-30% energy use reduction, fault detection and automatic reconfiguration to reoptimize the system in case of failure.
“This is an effort everyone should be involved in and passionate about,” Hendler said. “When building operators and managers as well as their residents commit to improving their energy habits, efficiency and infrastructure, it’s likely others in their community and industry will do the same. As we approach climate and decarbonization deadlines, goals and penalties throughout this decade, transforming the market is inevitable and building operators can and should play a leading role.”