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The smart building tech revolution is here. Are you joining?

Environmental, Social and Governance principals (ESG) are now a major factor in most investment decisions. It forces the building industry to face up to its responsibility to fight climate change. Making buildings truly sustainable should be the number one objective. 

When Larry Fink, chief executive of the world’s largest investment firm, Blackrock, speaks, the business world listens. In January 2022, he used his famous annual letter to shareholders to double down on his fund’s commitment to ESG. It was yet another sign that capitalism is changing. No longer should investors only care about the bottom line, Fink explained. Reducing a company’s carbon footprint, for instance, also ensures long-term viability, something investors and executives should care about, he wrote.

Fink’s letter is just one of many examples of a ground-breaking trend: ESG goals have become major factors in investment decisions, from stock trading to private equity and venture capital. The acceleration has recently been spurred by high energy prices and a realization of the societal and environmental costs of relying on fossil fuels. These formed a perfect storm forcing businesses and institutions all over the world to renew their focus on sustainability. And now, this shift is also forcing the construction industry to confront its responsibilities in the fight against climate change. 


For a long time, real estate developers and investors mainly focused on the bottom line, but recently, our industry has woken up to the fact that it simply must do more. In the Netherlands, the Dutch Green Building Council, an organization for sustainable construction, is announcing new trailblazing partnerships at a record pace. The Hague-based institutional real estate investor Bouwinvest has pledged to become Parisproof by 2045 and many institutional investors are following.

Our industry needs to level with the rest of the world: our awakening has been somewhat overdue. In 2018, buildings and the construction industry together accounted for 39 percent of the world’s CO2 emissions, according to the International Energy Agency, and building operations alone are responsible for 28 percent. Buildings have a long life—some two-thirds of the building area that exists today will still exist in 2040—meaning that without widespread decarbonization, these buildings will still be emitting CO2 in 2040. Change tends to come slowly to our industry—but we need it and we need it quickly.

Opposite effect

But how do we translate our good intentions into practice? It’s easy to get lost in a maze of rules and regulations, only to end up with solutions that only marginally improve things. For example, many office windows are fitted with a thin film that blocks sunlight to make offices easier to cool in the summer. It’s an admirable idea, but it has the opposite effect in winter: keeping out the sun means that office buildings will fail to harness the warming power of sunlight in the winter—making workers turn up the heating.

It’s a paradox of the construction industry: it has modernized rapidly in many aspects, but the average office building still contains less high-end technology than a modern car. People rely on technology to improve their health, finances and social life, but smart technology is remarkably absent in most buildings. It’s strange, because modern technology enabling buildings to harvest energy from the elements is already out there. Buildings can be heated by the sun and cooled by the wind. Offices can be filled with fresh outdoor air and natural light, getting rid of unnecessary—and frankly, annoying—fluorescent lighting once and for all.

Forward-thinking developers

The technology that manages to do all this is not particularly expensive or hard to use. Any building, new or old, can be fitted with a network of sensors that sends a stream of information to a building management system, that automatically creates ideal indoor conditions, while maximizing energy efficiency. This is not the future, it is now. All of this is already happening in the projects of the most forward-thinking developers.

If we’re to use all these tools to create truly sustainable buildings, real estate development needs vision. To be blunt: for too long, property developers, investors and the construction industry have been rigidly set in their ways. The planning of real estate projects tends to be compartmentalized, with every actor solely focusing on their backyard. This lack of an overarching vision bogs down much-needed progress.

But we’re catching up

Architects, often the driving force behind change in the building industry, are increasingly focusing their efforts to do even more. A growing number of companies are building regenerative design studios that go beyond reducing emissions or reducing carbon footprints—while sustainable design focuses on minimizing impact, regenerative buildings reverse the damage and have a net-positive effect on the environment. These buildings collect more rainwater than they use, use outer walls that can sequester carbon or incorporate huge solar panels into the design. “Reducing our footprint won’t prevent a climate catastrophe,” says Sean Quinn, who leads the regenerative design studio at the renowned international architecture firm HOK. “We need to leverage the power of design as a positive force to restore and regenerate the natural world. We want to continue conserving while also creating abundance.”

The Miller Hull Partnership, WRNS Studio, Mithun, and other top firms aim to have a similar positive net impact on the world, rather than just minimizing their carbon footprint. Such a philosophy can give rise to amazing projects like the Kendeda Building at Georgia Tech, Microsoft’s Silicon Valley Campus, and The LG Science Park in Seoul. Dutch architecture firm UNStudio has established an in-house Sustainability Engineering Group, dedicated to taking a holistic approach to sustainability and design. One of the first architects to truly embrace nature as a guiding force has been Paul de Ruiter Architects. Since 1992 (!) they have followed the principle that buildings need to produce more energy than they use. 

Do well and do good

These modern-day developments are evidence of the fact that investors, developers, and tenants all want to be part of the future. Projects like these are in high demand, if only they are available. Building owners are realizing tenants demand sustainable offices, full of high-tech solutions that make life more comfortable. Property developers are increasingly seeing that investors want to put their funds to work in projects that will do well and do good at the same time.

The construction industry is changing fast. As Ernest Hemingway wrote about the human experience of success and failure, “It happens gradually, then suddenly.” Changes can shock us—until we realize that we could have predicted the outcome all along. That is what’s happening in the property sector: suddenly everyone, from investors to construction companies to tenants seems to understand that now is the time to do more. 

It may be the rise of ESGs as a major factor in investment decisions. It may be a rediscovered realization that energy prices can change. But the underlying factor might be an even stronger, more deep-rooted sentiment in all of us. At last, something we can be proud of. 

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