Enabling sustainability in real estate - why we invested in Alasco

Measuring the financial return of ESG

Real estate, the oldest industry in the world, spending $10 trillion+ on property development and acquisition each year, also stands out among the worst when it comes to spending on innovation.

Not uncoincidentally, the industry is a famous laggard when it comes to energy and greenhouse gas concerns. Therefore, it is not surprising that the buildings in which we live and work, play such a major role in the challenge of climate change. The European Commission estimates that: "Collectively, buildings in the EU are responsible for 40% of our energy consumption and 36% of greenhouse gas emissions, which mainly stem from construction, usage, renovation and demolition".

Today property developers and investors are coming under immense pressure. Lenders, tenants and employees are facing new regulations, net zero carbon commitments and the reputational risks from foot-dragging on green issues. Properties that do not keep pace run risk of becoming stranded assets.

ESG is no longer a "nice to have" for the real estate industry. Of course, decarbonisation is a must, but processes like sustainability roadmaps, managing improvements, and meaningfully measuring and documenting progress have only recently started to emerge.  

ESG as an industry digitalisation driver

Lightrock recently invested in Alasco, an exciting young company based in Munich, attacking these two challenges for the real estate industry - sustainability and digitalisation. Its starting point is to offer a simple, paperless approach to digital invoicing and financial controlling for real estate developers and operators.

Alasco’s digital workflows give clients real-time visibility on the projects’ cost, as well as live forecasting of the budget. In addition, its invoicing feature allows clients to process invoices 75% faster than traditional methods. We see the success of Alasco’s cost and revenue modules carrying over into its ESG product. We are excited about the strategic importance of bundling ESG together with core financial project management.

Further, the digital invoice is a powerful future tool to empower their core customers, property owners and project developers. It ensures that contractors, jobsite managers and other employees do their part to comply with building sustainability goals - or risk not getting paid.

These tools are applicable throughout the building lifecycle. They allow for benchmarking options, while considering carbon footprint in several phases, such as the planning phase, ongoing operations and maintenance of the building. This reinforces Alasco’s position as an all-inclusive ESG tool.

Alasco's carbon calculator offers a way for commercial property owners to demonstrate progress in controlling their global CO2 emissions. This gives them a meaningful way to calculate emissions per square metre of office space. More than USD 26 billion in project volume has been budgeted through Alasco to date.

Alasco’s ambition is to offer both control and project management and use the data over time to drive better decision-making. For ESG, this can be energy simulations for future projects, return on CapEx or lifecycle assessment to create more sustainable buildings.

Investment decision driver

The company's SaaS, cloud-based project management software, provides real-time views of projects across a portfolio while moving away from paper trails, endless invoice revisions, old-school email confirmations and random spreadsheets typically used to manage jobsites.

The standardised data it collects and organises helps real estate asset owners track and manage their ESG commitments. Consistent sustainability metrics in real estate development are key to validating green building claims.

Expanding into the UK during 2022 and then globally, Alasco already counts blue-chip players in the real estate industry as customers, including Hines, SORAVIA and Garbe. By delivering tangible financial value with ESG metrics as a beneficial secondary effect, Alasco is catching on with property owners and project teams, planners, construction managers, contractors, asset managers and bank lenders.

In its first iteration, Alasco offers a comprehensive CO2 monitoring tool for all assets, which benchmarks the portfolio against the decarbonisation path. Its goal is to make ESG metrics more comparable and consistent across operations and properties. As such, Alasco's service is becoming a vital tool for financial due diligence in property M&A, identifying project risks and suggesting areas for improvement.

A 2021 paper published by Deloitte Germany argues that ESG compliance is vaulting to the top of the priority list for real estate investors. This way, it has become a decisive factor in determining any property's resale value. Today, an increasingly determinant of short-term value is the ability to develop green buildings and rent them out with "green leases", which are backed up by demonstrable ESG metrics.  


Pushing ESG into asset management

Alasco is taking asset management beyond what any pure-play ESG analytics company can do for the industry. It combines control of the purse strings with enforcement of sustainability metrics collection.

Alasco was founded in 2018 by three rockstar entrepreneurs, who previously co-founded and exited Stylight. Having turned real estate investors themselves, Alasco's founders have a clear vision of how to build a broad suite of software products for property developers and operators, with its invoicing tool as a lynchpin.

Moreover, Alasco is targeting the most profitable customer segment of the market. Real estate asset owners' EBIT margin runs around 20%compared with construction companies scraping by on 5% margins.

We think the company has hit the nail on the head of the real estate decarbonisation conundrum. Through combining financials with sustainability metrics, Alasco is positioned to become a next-generation leader in real estate financial controls and data management.

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