The EG Interview: 2150 on its fast and curious investment strategy

In a traditionally risk averse, slow-moving industry like real estate, the idea of pressing go on a potential future success in favour of holding firm and waiting for a sure-fire return on investment down the line may seem like an alien concept. But what happens when the luxury of time has been and gone? You invest like a fund on a deadline. You invest like 2150. The team at the London and Copenhagen-based sustainable urbanism tech fund moves fast, thinks fast and invests fast. Founded and headed up by a team of ex-big tech and global finance heavyweights, the VC launched in 2019 with a €240m (£201m) fund to back entrepreneurs who are reimagining the way we create urban environments across the globe. The fund closed at the end of 2021 with investors including Credit Suisse, the BMW Foundation and Norwegian sovereign climate investment company Nysnø. 2150 isn’t messing around. Neither is it prepared to wait for absolute certainty across its investment portfolio at the cost of the world’s most valuable and fast-diminishing currency when it comes to tackling climate change: time. “We would rather invest in an idea that might work today than an idea that will work two years from now,” says the VC’s co-founder Mikkel Bülow-Lehnsby. The stark truth is this mindset needs to be adopted by every single business in real estate if we are to stand a chance of addressing the industry’s impact on climate change and, critically, harnessing its power to do something about it. For now, at least, we are nowhere close. 2150 is prepared to lead the charge and prove you don’t have to sacrifice financial returns for impactful investments. Bülow-Lehnsby and 2150’s platform partner, Nicole LeBlanc, explain how. Uncertain success The fund is anchored and incubated by NREP, the Nordics-based real estate investor co-founded by Bülow-Lehnsby in 2005, where he remains chairman of the board. It was named 2150 because of its mission “to make the world of 2150 one we actually can and want to live in” and typically deploys capital in £5m-£15m chunks at a time. A global fund with a particular focus on Europe, where it has already invested in six countries, it works alongside an “ecosystem” of businesses and external investors operating within urban development. This means there is a ready-made network of test beds available to trial, pilot and launch the ideas and solutions coming out of the companies and start-ups they back. While the team does not advocate making rash, rushed or ill-informed investment decisions, it is prepared to take on more risk than some would be comfortable with. Because, says Bülow-Lehnsby, uncertain success is preferable to certain failure. “Imagine you are driving towards a brick wall at 100mph,” he says. “Making a sudden left or right turn at that speed is a risk. You don’t know what you are betting on or what will happen or where you will end up when you swerve. But one thing is for sure. It’s better than crashing into the wall.” Particularly when that wall is the ultimate destruction of our planet. The companies that 2150 backs are not random. They are investments made based on their potential to solve a problem already identified by 2150 as a major and imminent threat to the world we live in. “We want to create the companies that will offer the best solutions to some of the biggest problems in the urban environment,” says Bülow-Lehnsby. “We are curious investors, so we start by researching, doing deep dives and really working to identify the biggest problems, such as the impact of concrete on the world, biodiversity, ESG analytics and cooling to name a few. Then we go out and try to find solutions to alleviate those very targeted problems.” It is this sort of thinking that has already led 2150 to invest in businesses such as Biomason, which hopes to “shut off the world’s cement kilns” by growing concrete from bacteria in the hope of reducing C02 emissions within the construction sector by 25% by 2030, and Normative, the world’s first carbon accounting engine. Full speed ahead For platform partner LeBlanc, problem-led investment is a familiar strategy. She joined the fund in 2019 from Toronto, where she previously led the corporate VC and partnerships strategy at Alphabet’s urban innovation arm, Sidewalk Labs. The draw of 2150 was enough to lure LeBlanc away from Canada for two reasons. First, it facilitated a lifestyle she and her husband had become accustomed to in Toronto – “It turns out that Copenhagen might be the only other city in the world where you can cycle everywhere and live without a car and play recreational ice hockey every night of the week”. Second, it gave her the opportunity to continue what she had set out to do with the Sidewalk Labs project. “One of the things that I was doing at Sidewalk was figuring out how to work with start-ups, deploy them in this development and then also spin out a fund to be able to invest and support the development of these companies as they scaled within the project, but in other jurisdictions as well. When the decision was taken not to continue with the project, 2150 reached out and said it was doing something similar in Europe. It was so aligned with everything I was already working on.” The key to this comparison is that Sidewalk Labs’ key project, Toronto Waterfront, was designed and planned to be a digital district in its own right, an urban test bed. 2150 is specifically and deliberately looking for technology ideas and solutions that can be applied and scaled at a town or city level. This isn’t about tackling climate change one building at a time. It is about introducing at scale. “There are a lot of great elements of proptech and construction tech, but urban tech really encompasses all of that,” says LeBlanc. “We are building an equivalent of a New York City every month somewhere in the world. Cities use two-thirds of the global energy resources. We are really focused on making effective change in these urban environments and working out how everything has sustainable design embedded within it.” This comes back to scale. And that, says Bülow-Lehnsby, is one of the key characteristics that 2150 is looking for when it deploys its capital. “We need to see that there is a big, addressable market,” he says. This means that while 2150 takes risks on companies with bold ambitions, it does tend to wait until they are beyond seed stage. This also means they are better placed to be trialled within the ecosystem almost as soon as they are brought on board. So while 2150 stands by its speed-led approach and preference to invest in a possible success now than a sure thing in two years, the fund is looking for products rather than ideas. “That ecosystem of companies that provide us with that test bed have to know there is a very low likelihood that the start-ups we are putting to them will be a bad use of their time,” says Bülow-Lehnsby. “So, generally speaking, we put a high premium on something that is ready to use.” This, adds LeBlanc, is one of the major contributing factors to 2150’s ability to chase the most impactful investments in terms of tackling climate change without sacrificing financial returns. Set in concrete “If you think of a Venn diagram of companies and funds in this space, there are some that are entirely financially motivated and others that are entirely impact focused. We work at the intersection of those two,” says LeBlanc, adding that this isn’t a conversation focused solely on green premiums. “They exist,” she says. “Everybody knows about them now and there are customers prepared to pay them, particularly in the developed world.” But there is more to consider than that. “I think what we need to do is really focus on the data and on how we can find solutions that we can deploy now. How do we track the ROI? How do we continue to monitor that over time? We have hired a head of sustainability at 2150 who has recently published an impact framework. It sets out how progress can be measured and the different metrics that you need to start tracking. There definitely needs to be a lot more information, a lot more data and a lot more collaboration.” And when it comes to the environment, every solution to every major problem will come with a value attached, adds Bülow-Lehnsby. “Let’s take concrete as an example,” he says. “Concrete today is responsible for 8% of global CO2 emissions. We have a huge problem there and one that will, at some point, be priced. If and when incentives come in to reduce that figure across the sector, the two companies we have invested in so far that are enabling the use of concrete that has a much lower carbon footprint will be commercial assets. “For many years there was this notion that if you wanted to do good for the environment, then it had to be bad for business. And I’ve never understood that. Why should that be the case? In the long term, those companies that create problems are going to sit with the liability and those companies that solve the problems have a major competitive advantage. Thinking any other way has always been baffling to me.” Just do it It is a mindset that has plagued the real estate sector for decades. One that, forward thinkers can only hope, is starting to fall away as rapidly as it needs to. LeBlanc says 2150’s ecosystem set-up does help with what they classify as the “customer” side of the equation. “The real estate sector can and should behave like customers in the sense that they can deploy and trial these ideas and products and provide feedback. A lot of the companies in our ecosystem work with the start-ups or a scaled-up company to implement whatever their solution is and to have the patience to be collaborative even when there are some tweaks to make and some bugs to fix. “I appreciate that not every company within real estate has the ability to do that right off the bat, but they would start by taking meetings to provide feedback and start to figure out where these solutions might start to fit within their business. Be honest. It’s so important to be upfront with start-ups and say if you aren’t going to be a customer or if you need at least 12 months before they would be ready to invest the time and resource. The more upfront you can be, the better, and it is worth recognising that even a bit of feedback off an initial meeting about how that major incumbent within the real estate sector thinks this solution needs to get from A to B can be incredibly helpful.” And, it almost goes without saying, this is not a one-way street. It is more than likely that the tables will turn incredibly quickly with the real estate sector already clamouring to get its collective ESG house not only in order, but fit for purpose. Regulations, incentives, tenant demands, investor clauses; they are all coming, and they all have one thing in common: those without the right ESG criteria are unlikely to survive. Bülow-Lehnsby, true to form, does not mince his words. “It would be commercially irresponsible to not act now. You put aside the actual climate challenge which, in itself, is a pretty good reason to act and you can see that people who are still part of the problem in 10 years won’t have a viable business.” That’s the why. The driver behind the need for action. But 2150 is about the how. How can the industry start – and continue – to make meaningful progress? The key, says LeBlanc, is not to get overwhelmed. So much pressure can result in analysis paralysis when, actually, taking the first steps rather than overplanning for large, future targets will likely lead to greatest progress. “Just go. Now. Start acting,” she says. “There is no catch-all solution. You won’t wave a magic wand and suddenly save everything. A number of solutions will be built on top of each other. That’s what will solve this crisis. So don’t wait to build a huge masterplan with a clear roadmap. Just start now by taking steps and implementing technologies. It might seem immaterial, but the impact of those small steps will add up very, very quickly.” To find out more about 2150 and to meet Bülow-Lehnsby and LeBlanc, sign up to CREtech’s inaugural Climate event on 17-19 May in Copenhagen 2150’s investments to date Ampd – Ampd Energy delivers infrastructure for the electrification of construction sites, leading to less polluting construction, less carbon and a quieter, safer, more productive environment. Aeroseal – A company set up to seal leaky HVAC units and buildings enveloped with chewing gum-like material combined with AI and IoT-equipped installation hardware. Leko Labs – Patented wood lattice structures are combined with advanced robotics manufacturing to enable the construction of buildings of any size with wood, replacing steel and concrete. Normative – The world’s first carbon accounting engine, helping businesses calculate their climate footprint and reduce greenhouse gas emissions while setting a new standard in scientific accuracy in emissions accountancy. Biomason – Uses micro-organisms to build concrete and cement, mitigating up to 95% of CO2 emissions. Nodes & Links – Allows sustainable infrastructure projects to be delivered on time and with less waste. CarbonCure – Helps the concrete industry to reduce CO2 emissions while improving operations and economics. To send feedback, e-mail emily.wright@eg.co.uk or tweet @EmilyW_9 or @EGPropertyNews