Building to zero: Cleantech for Europe welcomes noa to our Investor Coalition

The built world is a major source of greenhouse gas (GHG) emissions, accounting for 35%of the EU's energy-related emissions in 2021. These emissions stem from both the direct use of fossil fuels in buildings, such as oil and gas for heating, and the production of electricity and heat for building use, including electricity for water heaters, lighting, electrical devices, and cooling systems.

On May 28, 2024, the revised Energy Performance of Buildings Directive (EPBD) entered into force, which aims to increase the rate of building renovations, reduce energy consumption and incentivize the uptake of cleantech innovation in the built world. Some key provisions for the decarbonization of the built world under EPBD include:

• All new buildings should be zero-emission from 1 January 2030.
• Member States will have to put forward a national building renovation plan out lining how all buildings will be zero-emission.
• Measures to increase the amount of EV recharging points in residential and non-residential buildings.
• Equipping existing public and non-residential buildings with solar technologies.

We recently caught up with Emily Nixon, ESG and Finance Manager at Cleantech for Europe´s newest investor coalition member noa. Emily shared insights about noa’s efforts to decarbonize the built world, key innovation themes in the built environment for 2024 and what policymakers must do to build a net zero world.

What criteria do you prioritize when evaluating potential investments in the built-world sector?

noa is an early-stage VC firm investing in technologies that decarbonise the built world. Launched in 2019 as A/O, we invest in pre- seed to series B startups across Europe and North America seeking to transform the entire spectrum of the world’s largest, least digitised, and most polluting asset class. Last year we announced our second fund at €250 million. As an early-stage VC, we focus on innovative technology solutions for the built world sector that can scale to become multi-billion-dollar businesses and the FTSE 100 firms of the future. We prioritise technologies or solutions that directly impact the built world and accelerate its positive transformation, either through decarbonisation solutions (like solar panels and battery technology) or by increasing digitisation to enhance efficiency and improve living conditions. In a nutshell, noa is backing tech that matters.

How do you see the role of venture capital in the built-world sector evolving as the sector matures?

VC firms play a crucial role in accelerating innovation and driving transformation in the built-world sector. Currently, only 5% of VC money is invested in this sector, but VC funding is essential for kick-starting disruptive solutions and scaling them through technology. As the sector matures, we anticipate more capital flowing into the built world, similar to the growth seen in fintech. It will be essential to invest in deep-tech companies which (given their longer timelines and product complexity) can be harder to underwrite.
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These investments will be essential for impactful change, so I think we’ll see VCs embracing this; identifying experts in the field and considering longer investment horizons to allow these startups the time and funds to develop and scale these solutions. Some of these businesses also need more than venture capital at times, and it’s important to know when we are the right capital or often one of the different sources of capital necessary for long term success.

Are there any underserved areas within the built-world that you believe present significant opportunities for startups and investors?

The entire built world represents a vast, multi-trillion-dollar market with significant opportunities for innovation and investment. Startups focusing on sustainable, affordable, and efficient construction solutions and materials are in high demand, given the increasing urbanisation and housing shortage. Improving infrastructure across cities, including smarter and more autonomous systems, is essential for resource management and climate resilience. Startups addressing climate resilience, sustainable materials, and resource management present significant opportunities for investors.
There are also other structural issues that go beyond hardware and software. The labour shortage for green skills is a key bottleneck, and companies are now creating tools to increase the productivity of installers or train a new generation of tech-enabled installers.

Can you share some innovation themes you see in the built-world sector for 2024?

In 2024, several innovation themes are emerging in the built-world sector, including:

• Energy storage solutions.
• Smart grid technologies;
• Addressing the labour gap through automation.
• AI-first approaches to building management.

What policy measures would most effectively accelerate the decarbonization of the built environment?

We believe that both private and public sectors have a role to play in accelerating the decarbonisation of the built world. Effective policy measures include:

• Mandates or building standards requiring the use of sustainable materials and renewable energy infrastructure in construction and renovations.
• Incentive systems to make retrofits more affordable and widespread.
• Long-term financial support for implementing decarbonising technologies.
• Clear regulations that encourage investment in climate-resilient infrastructure.
• International cooperation to share best practices and resources for decarbonisation efforts.

What are the main financial barriers to decarbonizing the built environment, and how can they be overcome?

The high initial cost of implementing solutions and the lack of financial incentives for building owners. To overcome these barriers, solutions include:

• Increased grants and subsidies for decarbonisation projects.
• Standardised incentives for building retrofits and renewable energy installations.
• Financial instruments such as green bonds to attract investment in sustainable infrastructure.
• Public-private partnerships to share the financial burden and risks of decarbonisation projects.
• Education and awareness campaigns to emphasise the long-term benefits of decarbonisation investments.

What is one thing you think policymakers are missing on decarbonizing the built environment?

Policymakers often overlook the comprehensive and interconnected nature of decarbonising the built world. It's not just about individual technologies or mandates but requires end-to-end investment and transformation. In this vein, policymakers should focus on clear building standards and financial incentives along with ensuring access to resources and long-term planning.

We believe that holistic strategies that address the entire lifecycle of buildings and infrastructure to achieve meaningful decarbonisation, from construction to operation and retrofitting are the most impactful.

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