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key vulnerability persists in the form of carbon leakage. Without Carbon Border Adjustment Mechanisms (CBAMs), companies investing in cleaner production risk being undercut by cheaper, high-carbon imports. For investors, this regulatory gap represents a clear threat to margins and capital discipline. Investment Implications: differentiation emerging For investors, this transition is creating a


bifurcated opportunity landscape: 1. Genuine low-carbon innovators with validated,


scalable solutions will benefit from regulatory preference, stronger consumer demand, and enhanced access to ESG-aligned capital. 2. Lagging incumbents, with little progress on


decarbonisation, face higher carbon costs, weaker pricing power, and restricted financing options. ESG-linked lending is already differentiating


capital access, and this is set to intensify as carbon disclosure frameworks mature. The sector’s competitive dynamic is shifting from volume leadership to carbon-adjusted margin leadership.


Decarbonisation demands more than materials


Harry Kilby, analyst, energy and resources, Edison Group explains why green materials are necessary but not sufficient for decarbonising the built environment


A


s the urgency to meet Net-Zero targets accelerates, the built environment remains a critical yet often under-addressed sector


in the decarbonisation narrative. Buildings are responsible for almost 40% of greenhouse gas emissions; in the UK, the figure is around 25%. The challenge is clear: reducing emissions from both existing and future building stock must move up the priority list. The complexity lies not in identifying the solutions, but in aligning economics, policy, and supply chains to make them scalable and investable.


The retrofit Imperative


By 2050, around 80% of UK buildings will be those standing today. This hard fact places retrofitting, rather than new construction, at the heart of any credible decarbonisation pathway. Upgrading operational efficiency and tackling embodied carbon is essential. However, the economics of retrofit are fragmented, with progress dependent on policy frameworks rather than pure market dynamics. For investors, the question becomes: where does retrofit capital flow first, and how will regulatory structures catalyse scalable demand?


Green materials: progress with limitations


Are low-carbon materials the answer to greener buildings? They are part of the solution, but not


the whole equation. Edison’s research, including conversations with European building materials firms, reveals notable steps forward. Companies are cutting emissions in energy sourcing and logistics. However, primary manufacturing processes such as kiln firing in bricks or clinker production in cement remain heavily carbon-intensive and technologically stubborn.


Noteworthy innovation is emerging:


¡ Michelmersh’s hydrogen-fired kilns are pioneering alternative fuel use. ¡ SigmaRoc’s lime carbon capture trials represent early-stage process decarbonisation. ¡ Marshalls is embedding captured CO2 into concrete products, adding circularity to production. These are important indicators of progress. Yet, these projects face a fundamental constraint: they are sub-scale, capital-intensive, and uneconomic without substantial policy or pricing support.


The policy-driven reality


Policy remains the sector’s primary catalyst. The UK’s Net Zero Carbon Buildings Standard (2024) and upcoming Future Homes and Buildings Standards (2025) are starting to create standardised expectations, moving the sector beyond voluntary commitments. The government’s £1.4bn retrofit funding over the next decade is directionally positive, but not transformative on its own. A


Ground-Level Insights: sector voices


Conversations with companies like Forterra, Genuit, Alumasc, and Ibstock highlight three persistent realities: 1. Decarbonisation is no longer discretionary; it is embedded in long-term strategy. 2. Process emissions remain the sector’s hardest


challenge, with scalable solutions still distant. 3. Scope misalignment remains a barrier.


Many housebuilders optimise for Scope 1 and 2 emissions, leaving material Scope 3 emissions under-addressed.


Systemic thinking: the next essential shift


Material innovation, while critical, is insufficient in isolation. Decarbonising the built environment demands systemic integration across the design, construction, and supply chain lifecycle: ¡ Demand-side reductions through smarter design. ¡ Electrified transport and logistics fleets. ¡ Renewable-powered production facilities. ¡ Supply chain alignment to ensure cost pass- through feasibility.


Conclusion: innovation must meet economic reality


Low-carbon materials are an essential tool, but not a standalone solution. Without robust policy mechanisms, economic viability, and supply chain coordination, their impact will remain constrained. The opportunity lies in identifying companies where material innovation is directly enhancing competitive positioning and margin resilience, not just compliance optics. As regulatory and market forces converge, those who can execute credible, scalable decarbonisation strategies will not only reduce emissions but also redefine the sector’s margin structure.


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