Sustainable renovation opens doors for companies which facilitate energy and water efficiency
Sustainable renovation is on the increase. Together we are insulating vast numbers of roofs, walls and floors. We are increasingly generating our own electricity and providing our own water supply. Is all this responsible renovation also kinder to your wallet? And what kinds of business are sharing in the success of this renovation trend? A conversation on these points and more with Anthony Sandra, Portfolio Manager at KBC Asset Management.
Payback period for energy renovations becoming shorter
According to figures released by the Flemish Energy Minister, Zuhal Demir, many of us are securing grants to help fund renovation projects. More than 100 000 homeowners have applied since the launch of MyRenovationGrant, a one-stop-shop for applying for these grants. That was double the expected number of applications, demonstrating that sustainable renovation is on the rise.
The rationale is clear. First of all, open space is scarce. People who want to live sustainably often prefer renovation to a new-build home, which means that they do not take up any new space. There is also the government's ambition for all houses and flats to achieve an EPC (Energy Performance Certificate) ‘A’ rating by 2050. For owners of homes with a lower EPC rating, this ambition translates into an obligation to make their home more energy-efficient. The high gas and electricity prices in 2022 and early 2023 were also an important factor in prompting people to renovate their homes.
Despite higher investment costs due to high inflation and supply problems, there has never been a better time for energy-efficient renovations. They reduce energy bills, the payback period is shorter and the value of the property increases.
Anthony Sandra, Portfolio Manager at KBC Asset Management
Home batteries riding on the coat-tails of the success of solar panels
The top three projects carried out in 2022 make clear where people’s focus lies: retrofitting LED lighting; insulating floors, walls and roofs; and installing heat pumps. Companies which offer these energy-efficient solutions are benefiting from the renovation trend. ‘A good example is Saint-Gobain, a company which markets high-efficiency glass with a high thermal insulation value. This glass keeps the heat in during the winter and keeps it out in the summer,’ says Anthony Sandra, Portfolio Manager at KBC Asset Management. ‘Other examples include companies like Recticel and Kingspan, which make insulation, or Nibe Indrustrier AB and Daikin, which produce heat pumps; these companies offer products which help reduce energy costs by increasing the energy-efficiency of the home.’
Many households are also making installing solar panels a priority. Last year, twice as many solar panels were installed as in 2021, and the numbers are still rising. ‘Generating your own energy by installing solar panels to produce electricity or a solar water heater to provide heating and hot water, is gaining in popularity,’ says Sandra. ‘There is also special software available that you can use to control your electrical appliances in order to reduce your peak consumption. This can be really worthwhile, especially for people who own or are considering buying an electric vehicle.’
Along with the rise in solar panel installations, home batteries are also gaining ground. A lot of homeowners who have solar panel owners buy a home battery so that they can temporarily store solar power they have generated but do not need immediately. Providers of ‘inverters’, such as SMA Solar, Enphase, Solaredge, etc., are capitalising on this trend towards smart home networks.
There were nearly 100 000 new solar panel installations in Flanders in just one year. And home battery installations are rising in line with this trend.
Anthony Sandra, Portfolio Manager at KBC Asset Management
The prospect of higher water prices in the future are making us think about our water resources
Sustainable renovation does not have to stop at investing in energy saving. Given the increasing periods of prolonged drought and water scarcity, it also pays to look at water management. Quick wins, such as taking a shower instead of a bath, or even the recent revival of the face flannel for washing, can be enhanced by a few simple interventions.
‘It’s possible to achieve significant savings with a limited budget, for example fitting a water-saving shower head, installing a water butt, and so on,’ says Sandra. ‘More permanent solutions include installing a water cistern and connecting appliances such as a washing machine and toilet to rainwater.’ Under the Flemish government's Blue Deal, a project launched in 2020 to combat water scarcity and drought, from October 2023 anyone carrying out building or renovation works will be required to install a cistern of at least 5 000 litres, or larger depending on the roof area.
A rainwater installation is a longer-term investment. The payback period largely depends on the price of tap water in the future. Due to the ongoing droughts, water companies believe water will be up to 20% more expensive in the coming years.
Anthony Sandra, Portfolio Manager at KBC Asset Management
‘Companies like Uponor, Georg Fisher or Wienerberger, which specialise among other things in water pipes, water meters and pumps, offer products that can optimise our water management and prevent leaks.’
Thematic investing offers an opportunity to invest in sustainable renovation trends
Renovating turns a house into a more sustainable home whilst at the same time providing a boost for businesses that facilitate energy and water efficiency. There are several options for investors looking to take advantage of this. Investing in individual companies allows for a specific focus, but also involves risks. From a broader perspective, thematic funds offer investors the opportunity to invest in a range of sustainable renovation trends including renewable energy, Internet of Things, water management systems, and so on.
Investing in sustainable living therefore not benefits the planet, but also our wallets. ‘As a famous astronaut once said: 'One small step for man, one giant leap for mankind'. That also applies here. If everyone takes a small step forwards, together we can make a big impact,’ concludes Sandra.
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This article is informational only and should not be considered investment advice.
