Circular construction as a cornerstone of your assets
Belgians are born with a brick in their stomach, so the saying goes - an innate desire to build their own home. So how do we keep construction sustainable? By ensuring that we build in a circular way, with an eye to recycling building materials and equipment. There’s a reason why circular construction is in vogue. It is a response to megatrends such as urbanisation and scarcity of natural resources. It helps us to build a more sustainable living environment. It can also be an interesting building block for investors.
Circular construction offers a solution to several problems. It can transform the construction industry from one with a huge environmental impact to one that actively contributes to a sustainable future.
Jonas Theyssens, Equity Analyst at KBC Asset Management
Transformation of the construction industry
In a circular economy, buildings and building materials are used, reused, adapted and rebuilt for as long as possible. This helps prevent too many materials ending up as waste and reduces the ever increasing draw on new material sources. Circular construction offers a solution to several problems. It can transform the construction industry from one with a huge environmental impact to one that actively contributes to a sustainable future.
Currently, the construction industry in Flanders produces some 15 million tonnes of waste each year, accounting for about 35% of our total waste. Construction and demolition activities account for between 5% and 12% of Belgium’s national CO2 emissions. Circular construction can make a big dent in those figures, with positive impacts on climate, environment, economic growth and employment. Using fewer materials or reusing more and closing (local) raw materials and materials chains helps reduce the overall environmental impact.
As an example, stone rubble is already being used as a base material for building foundations in road construction. This is referred to as ‘downcycling’: the material is repurposed for use in a lower-grade application than its original purpose. But that isn’t the only option. Ceramic building materials, for example, can be perfectly well reused at the end of their life as the raw material for new ceramic products.
The future is circular
By establishing a link between demolition sites and manufacturers, construction debris can be recycled for high-quality repurposing, as long as the right match can be found. It is not there today because selective demolition was not common practice in the past. But that could change in the future. Through training courses, for example, demolition experts and contractors can gain the necessary product knowledge so that in the future they will be able to identify whether building materials are suitable for high-value recycling by manufacturers.
The tide is starting to turn, though it is a bit like turning an oil tanker: impractical, slow and focused on long-term investments. Yet the transition to a circular construction industry is unstoppable.
Jonas Theyssens, Equity Analyst at KBC Asset Management
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People in general tend to overestimate the short-term impact of new solutions – such as circular construction – and underestimate their impact in the longer term. Investors who are not hamstrung by short-term thinking, but who believe in the longer-term potential of the circular construction industry, are giving themselves the opportunity to be rewarded within five to ten years.
The headwinds for the real estate sector are finally easing, helped by the central banks' interest rate cut, which in turn will boost investor confidence. The tide is starting to turn, though it is a bit like turning an oil tanker: impractical, slow and focused on long-term investments. Yet the transition to a circular construction industry is unstoppable. From more economical use of materials through downcycling and recycling to upcycling. Several companies are leading by example.
From ambition to action
More and more companies are making their ambition to contribute to a circular construction industry very concrete. Sika, for example, a world leader in the construction chemicals sector, is pushing sustainability to the forefront with the production of the first ever biomass-based protective coating for concrete, the production of high-performance grouts with a 30-40% lower carbon footprint and the development of the pioneering ‘reCO2ver’ concrete recycling process, which captures CO2 and enables old concrete to be upcycled.
Trex, a US manufacturer of composite decking tiles and outdoor panels, also has a sustainability mission: to fight deforestation while reducing plastic and wood waste. Their products consist of 95% recycled materials, such as wood waste that Trex buys from large industrial companies, and recycled plastic from shopping bags and food packaging. Their products are much more durable than wooden decking and do not require chemical treatment, making them much more environmentally friendly. At the end of their useful life, they can be recycled.
The production of concrete requires very many materials, such as cement, sand and gravel. When the time comes for demolition, concrete waste often still ends up in landfill. Heidelberg, the world's third largest producer of cement and concrete, is trying to change this through its ReConcrete process. They grind down broken-up concrete and separate the different components. The leftover sand, gravel and cement paste are recycled to create new concrete or clinker.
Saint Gobain, one of the world's largest producers of all kinds of building materials including glass, mortars, glass wool, plasterboard and ceramic materials, not only wants to significantly reduce its CO2 emissions and water consumption; the company has woven sustainability into its business model and strategy and is also increasingly betting on circular building materials. By 2030, Saint Gobain is aiming to reduce its production waste by 80% and reduce the use of raw materials by using recycled materials as far as possible.
A final example to conclude the list is Kingspan, best known as a producer of insulation panels. Kingspan is also increasingly focusing on the circularity of its products, for example by using recycled materials in its insulation panels. With the Quadcore panels, the company has a product on the market that already consists of 25% recycled steel; a percentage the company intends to increase by looking for bio-based and renewable materials and thus ensuring that most of the raw materials are recycled in the future.
But the company is going a step further; it is looking to reuse its products at the end of their useful life, potentially for other applications. This will be achieved by giving third parties the option to sell their used insulation panels back to the company when a building is demolished or renovated. A specialist team helps to dismantle and recover the panels, which can then be sold back to Kingspan.
Cornerstone of your assets
Investing is best done for the long term and with expertise. Especially if it has to be sustainable and socially responsible, which is what the circular construction investment theme is. It is therefore best to choose a professional, sustainable and thematic investment fund.
Jonas Theyssens, Equity Analyst at KBC Asset Management
Building takes time. And it's best to get it right first time. After all, most of us want to settle in a property for a long time. Selecting the most suitable and sustainable building contractors, materials, techniques and equipment efficiently is no easy task. A turnkey solution can provide an answer. Key choices are then made for you, with professional expertise.
Investing is no different. That’s also something that’s best done for the longer term and with expertise. Especially if it has to be sustainable and socially responsible, which is what the circular construction investment theme is. Don't think you have the knowledge yourself to make the right investment choices? Do you really want to help make a difference? Then it’s best to choose a professional, sustainable and thematic investment fund. You can build on that. In a circular way, of course.
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The information contained in this publication is for information purposes only and should not be considered as investment advice.
