At ACS Group, we believe sustainable housing is important in the battle against climate change. Real Estate is a major contributor of CO2 emissions, contributing 40% to global CO2 Emissions (building operations accounting for 27%, and building materials and construction accounting for 13%).

As we envision a decarbonized future, energy efficient and sustainable homes emerge as a key component.  Some of the companies in our Sustainable Future Fund are leaders in this area and help drive the transition towards more environmentally sustainable housing.

While there are multiple aspects of sustainable housing, in this note we focus on energy efficiency and renewable energy integration. We intend to highlight the latest construction materials, technologies and energy efficiency standards that go into the “House of the Future”.

Energy Efficiency

Energy efficiency plays a crucial role in sustainable housing as it drives reduced energy consumption leading to cost savings for the homeowner coupled with reduced carbon footprint of the house. We have identified the following key approaches as critical for maximizing energy efficiency in houses.

Effective Insulation

Proper insulation helps prevent heat transfer, minimizing the need for excessive heating or cooling. By preventing unwanted heat transfer through walls, roofs, and windows, insulation significantly reduces the reliance on heating and cooling systems.

Efficient Appliances and Lighting:

Traditional appliances are energy intensive and replacing these with energy-efficient refrigerators, air conditioners, and washing machines, can lead to cost savings. Energy-efficient lighting options, such as LED bulbs, offer numerous cost benefits to homeowners.

Energy-Efficient HVAC Systems: Heating, ventilation, and cooling (HVAC) systems account for a significant portion of a house's energy consumption. It is estimated that 50% of a household’s energy bill goes towards heating and cooling. From an environmental perspective, researchers estimate air conditioning alone is responsible for the 1,950 million tons of CO2 released annually, which is 4% of total global greenhouse gas emissions.

Advanced Energy Management:

Advanced energy management technologies allows consumers to optimize energy consumption, enhance operational efficiencies, and reduce greenhouse gas emissions. By providing real-time insights into energy usage patterns and system performance, these technologies compliment the energy efficient insulation, appliances, and HVAC Systems to achieve significant cost savings and realize environmental benefits.

Renewable Energy Integration

In addition to energy efficiency, incorporating renewable energy sources in sustainable houses is essential to achieving a net-zero or positive energy balance. The most popular renewable energy systems catering to residential housing are as follows:

Residential Solar Photovoltaic (PV) Systems

This is most widely adopted method of renewable energy integration. Solar PV systems are typically installed on roof tops or as ground-mounted arrays to capture sunlight. The declining unit cost of solar panels, combined with government incentives and financing options, has made solar energy an increasingly viable option for homeowners. Residential solar PV installations have seen significant growth, with over 2 million installations in the United States and 43,000 installations in Canada.

Air Source Heat Pumps

Air source heat pumps (ASHPs) extract heat from the outdoor air to provide heating and cooling for residential spaces. It accomplishes this by absorbing heat energy from the outside air, compressing it to increase its temperature, and then releasing it indoors through a heat exchanger. ASHPs utilize electricity to power the system, as opposed to fossil fuels which are used in a typical natural gas furnace. In heating mode, the ASHP transfers heat from the outside air to warm the indoor space, while in cooling mode, it reverses the process to extract heat from the indoor air and release it outdoors.

Geothermal Heat Pumps

Geothermal heat pumps (GHPs) utilize the Earth's stable temperature to provide efficient heating and cooling for buildings. They extract heat from the ground through a system of pipes buried underground, known as the ground loop. In the heating mode, the GHP absorbs heat from the Earth to warm the building, while in the cooling mode, it extracts heat from the building and transfers it back to the ground. By tapping into the Earth's natural heat, homeowners can realize substantial cost savings and enhanced energy efficiency.

Energy Storage Systems

One of the biggest challenges with Renewable Energy has been storage and energy on demand. Energy Storage systems enable homeowners to store excess energy generated from renewable sources, reduce reliance on the grid, and achieve significant cost savings. Some of the popular systems in the market are:

Battery Energy Storage Systems (BESS)

BESS is the most popular solution that helps store electricity from renewable sources such as solar panels in rechargeable batteries. The batteries store the energy for later use, typically during peak demand periods or when renewable energy generation is low. The energy management system monitors the battery’s charge level, controls the charging and discharging process to ensure optimal performance. Through an inverter, the stored energy is then converted to electricity to power the home instead of relying solely on the grid. The flexibility to store excess energy during periods of low demand or high renewable energy production, helps homeowners avoid peak-demand charges and take advantage of low demand electricity rates.

Residential Thermal Energy Storage (TES)

TES systems work by storing and releasing heat energy to meet heating, cooling, and hot water demand in homes. These systems utilize various storage mediums such as water, ice, or phase-change materials. During excess or off-peak energy availability, the TES system absorbs heat energy, which is stored in the storage medium. When required, the stored heat is released to provide the desired temperature, reducing the need for conventional heating or cooling methods. By optimizing energy usage and utilizing stored heat energy, residential TES systems offer cost savings and increased energy efficiency for homeowners.

Conclusion

The combined efforts of energy efficiency measures and renewable energy integration can result in a substantial reduction in greenhouse gas emissions. Moreover, promoting energy efficiency and renewable energy in residential buildings can foster innovation, create green jobs, and drive economic growth within the clean energy sector.

To ensure widespread adoption, it is crucial for policymakers and industry stakeholders to provide incentives, financial support, and accessible information to homeowners. This can include tax credits, rebates, and streamlined permitting processes for renewable energy installations. Education and awareness campaigns should also be implemented to inform homeowners about the benefits and potential cost savings associated with energy-efficient and renewable energy solutions.

Our perspective is that energy efficiency and renewable energy integration in houses offer a pathway to a more sustainable environmental future. By prioritizing these measures, homeowners can reduce their carbon footprint, enhance energy security, and contribute to the transition to a low-carbon economy. This change is accelerated when individuals, communities, corporations, and governments work together to facilitate the adoption of energy-efficient and renewable energy solutions in residential buildings. Ultimately, this will lead to a greener and more sustainable future.

At ACS, we believe in investing in companies that play an important role in the decarbonization of housing. These companies fit with our thematic approach of Sustainable Cities and Energy Transition.

References:

ACS Group-Investment in Water Infrastructure

March 2023

At ACS Group, water infrastructure is a theme we’ve identified in the ACS Sustainable Future Fund as having both strong financial and Socially Responsible Investing merits.

We believe increased urbanization will put strain on municipal infrastructure, including existing water infrastructure.  To grow sustainably, cities must address the need for updated and modern water infrastructure. 

What is Water Infrastructure?

According to the US Environmental Protection Agency (EPA), water infrastructure includes all man-made and natural features that move and treat water. It can be classified into three segments:

In North America and Europe, the vast majority of water infrastructure is government owned and managed.  However, the suppliers of components for this infrastructure, such as pipes and valves are typically for-profit companies, including several publicly listed companies.  As such, the largest customers of these companies are governments, and government funding drives much of the investment in water infrastructure.

Why is Water Infrastructure Investment Crucial?

Much of the water Infrastructure in the US and Canada was built in the early 20th century and is long overdue for upgrades.  The American Society of Civil Engineers (ASCE) estimates as of 2019, the total capital spending gap on water infrastructure in the US is upwards of US$81 billion.  The Federation of Canadian Municipalities estimate C$50 billion alone needs to be invested to renew water infrastructure in Canada that are in poor condition. According to OECD, European Union would need a cumulative additional spend of EUR289 billion by 2030 to comply with guidelines.

To this end, ASCE estimates the US has a water main break every two minutes and results in the lose of 6 billion gallons of treated water each day. 

Outdated water infrastructure has serious consequences on quality of life. In 2014, Flint, Michigan witnessed the catastrophic effects of outdated water infrastructure when over 100,000 people, including close to 12,000 children, were exposed to elevated lead levels from aging lead pipe systems.  Elevated lead exposure could lead to serious health issues, including reduced intellectual functioning and increased chances of Alzheimer’s.

The stability of water infrastructure will be further stressed by changing weather patterns brought on by climate change.  It is anticipated that these less predictable weather patterns may create more major weather events, such as urban flooding, stormwater management issues and droughts.  Having the necessary infrastructure in place will be even more critical.

US Funding for Water Infrastructure

The Biden administration passed the Infrastructure Investment and Jobs Act (IIJA) that provides funding of up to US$55 billion to upgrade US water infrastructure.  This includes US$12 billion on wastewater/stormwater management systems and US$4 billion on remediating synthetic chemicals (PFSA) in drinking water. IIJA also includes dedicated funding of US$15 billion to replace lead pipes in the United States.  However, the Brookings Institution estimates the cost of replacing lead pipes from the US drinking water system will exceed US$28 billion, so while this is a welcome step, we note that there will likely be much more funding required in future to address this infrastructure need.

The ACS Investment Thesis

From a Socially Responsible Investment perspective, we believe that access to clean drinking water and sanitization is a fundamental human right.  We believe that government owning and operating water infrastructure ensures that equitable access to this human right is best preserved.  To enhance the government’s ability to effectively deliver on this, we view the role of private industry as critical.  We highlight that the private sector has brought about innovations in water infrastructure that reduce potable water losses and mitigate urban flooding. 

Some of the most exciting innovations we’ve seen recently in water infrastructure are:

From a financial investment perspective, as the approved funding makes it way to the state and local governments, we expect the water infrastructure companies to benefit from increased order backlog that will help drive revenue growth and earnings visibility. We see companies providing drinking water infrastructure to be the early beneficiaries of the upgrade cycle, followed by suppliers in wastewater and stormwater infrastructure. Our expectation is the spending is not a one-off event, as the need to upgrade and maintain the infrastructure will continue to drive strong demand for the water infrastructure suppliers and contractors. 

From both our SRI and financial perspective, at ACS, we are constructive on companies that play important roles in the modernization of water infrastructure.  This area of investment is a focus for us and supports our thesis on Sustainable Cities.

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Sources Cited

  1. American Society of Civil Engineers, “Report Card for America’s Infrastructure”, https://infrastructurereportcard.org/cat-item/stormwater-infrastructure/ accessed Feb 2023
  2. Various organizations, “Canadian Infrastructure Report Card”: http://canadianinfrastructure.ca/en/index.html, accessed Feb 2023
  3. Brookings Institution, “What would it cost to replace all the nation’s lead water pipes?”: https://www.brookings.edu/blog/up-front/2021/05/13/what-would-it-cost-to-replace-all-the-nations-lead-water-pipes/, accessed Feb 2023
  4. Environmental Protection Agency, “Bipartisan Infrastructure Law”: https://www.epa.gov/system/files/documents/2021-11/e-ow-bid-fact-sheet-final.508.pdf, accessed Feb 2023
  5. OECD, “Roundtable on Financing Water”: https://www.oecd.org/water/Session2-Financing-needs-and-capacities-for-water-related-investments-in-Europe.pdf, accessed Feb 2023