Video transcript

Ryan Merkel: Today we are talking about ESG and how the construction and building product sector is embracing new technologies to protect the planet. For background, the construction industry in the United States is about $1.5 trillion, and it's about a $10 trillion market globally. According to McKinzie, the construction industry is the dirtiest and least digitized sectors of our economy. In fact, the building and construction industry accounts for almost 40% of global carbon emissions. Looking ahead we see five forces that will drive future growth and investment: one, a structural shortage of labor; two, a severe shortage of affordable homes estimated at 7 million units; three, consumer preferences for sustainable products; four, environmental regulations; and, five, digital to lower construction waste. An example of an industry solving the affordable home crisis and helping to save the planet is the prefabricated home builders. These are homes built in a factory using sustainable materials and newer technologies. Prefabricated homes are about 10% to 25% lower cost than traditional building, and up to 50% faster to build. In countries such as Europe and Japan, prefabricated homes have been proven out at scale, but here in the U.S. the penetration rate is only 3%. We think this is about to change. Another example of the increasing use of composite building materials is green cement, plastic lumber, and cross laminated timber to replace cement and lumber. These materials are better for the planet and can be more durable. There are also emerging technology solutions such as 3-D printed homes and material management platforms that can reduce project costs. Only a few dozen 3-D printed homes have ever been built in the United States, but that is about to change given significant investment by private capital.

One of the big watch items for the sector is Biden's American Jobs Plan. There is over $200 billion allocated to affordable housing in making homes and buildings more energy efficient. This could provide a big boost for companies that provide HVAC, roofing, and lighting, as well as private companies focused on prefabricated housing, 3-D printed homes, and composite construction materials. We believe the green construction market is set for explosive growth and it's only inning one.