On Tuesday, June 27th, Icebreaker One held its second Impact Investing advisory group meeting. In the lead up to the meeting, advisory group members collectively produced a wide-ranging list of use cases ranging from Scope 3 emissions in road transport infrastructure assets to the ESG reporting of micro companies. Our focus on this second meeting was refinement, as we looked to prioritise a single use case.

After carefully considering the blockers and opportunities, greenhouse gas impact, financial needs and stakeholders involved, we arrived at a use case centred around the built environment, a sector responsible for around 40% of global greenhouse gas emissions.

Use case 1: Increased transparency and comparability of the environmental data in ESG disclosures is needed in supply chains to better enable impact investment decisions in the commercial built environment.

First impressions

While the chosen use case received widespread support from the Advisory Group members, its broad and wide reaching nature indicated the need for further exploration. Indeed, being specific about the data, stakeholders, investment type and underlying standards and regulatory requirements would help us identify what was needed to unlock the use case while also preventing mission creep.

Decision makers & Investment types

Identifying the key decision makers in our selected use case would enable a more targeted approach, with insurers, banks and investors all emerging as crucial players capable of driving real impact in this space.

For example, if there was widespread recognition in the insurance industry that more sustainable buildings present a lower risk, this could subsequently reduce insurance payouts, and be reflected in reduced rates. Banks, on the other hand, have the ability to offer preferential financing or incentives for building projects that prioritise sustainability.

However, in order to identify a key decision maker, we felt it important to first narrow down the type of investment we want to focus on. This came in the form of three viable investment types: debt instruments, project financing and lending. Green bonds, for example, are a debt instrument that offer a targeted way to raise funds specifically for projects or initiatives that have environmental benefits.

Benchmarking & Regulation

One member of our AG highlighted the prominence of our chosen use case on the EU’s agenda and its high demand at conferences. Unpacking this, we can see the importance of frameworks like the EU Taxonomy Regulation and its focus on helping investors allocate capital toward sustainable activities. Growing pressure from the EU Taxonomy means that investments that are more aligned with net-zero will be favoured by banks and investors. In the context of the built environment, banks may offer favourable financing terms or incentives for projects that align with the EU Taxonomy’s criteria.

Elsewhere, organisations like GRESB (Global Real Estate Sustainability Benchmark) enable investors and real estate companies to measure, benchmark and improve their ESG performance over time. And, although participation in GRESB is voluntary, there is a belief that a wider adoption of these benchmarking tools will encourage more consistent reporting in the future.

Further thoughts and considerations

  • Accessing accurate energy and water data from building occupants is an ongoing challenge
  • We have to ensure the data involved in the use case is accessible, compatible and machine readable
  • In cases where the building is leased, the energy usage data may be dispersed among multiple tenants, making it difficult to gather a complete picture
  • Important to identify one piece of data that’s integral for investment decision-making
  • Questions were raised about the roles and organisations involved, the gathering and validation of data, risk assessment, and monitoring impact expectations throughout the investment’s lifetime

Looking ahead, our chosen use case helps us to determine the initial requirements for an online Icebreaker One demonstrator that can improve the data sharing and infrastructure of company impact data. It also provides scope for future iterations of the use case, potentially helping to solve cross-industry problems.

Our next advisory group meeting takes place on July 27th at 10-11:30am (BST), if you’re part of the ESG ecosystem or have experience in the built environment sector we would value your input and participation. Learn more and sign up here.