Home owners could soon save money on loans and insurance by making their homes more energy efficient, while banks and insurers gain new insights into the sustainability of their residential portfolios, thanks to Adelaide-based fintech startup ValAi.
ValAi’s core product, known as Greenhouse, is an app that allows residential homeowners to see their home’s energy use and climate resilience in real time.
It includes advanced machine learning and artificial intelligence to provide practical tips that allow homeowners to save money and improve the value of their property by making it more sustainable and energy efficient.
Meanwhile, for banks and insurers, the platform will fill a vital need by providing data on the sustainability of the properties in their residential portfolios at an individual asset level.
The platform could potentially allow banks to make energy efficiency improvements a condition on the loans they issue.
The venture is the brainchild of co-founders Allys Todd, a STEM expert who was previously the general manager of the Conservation Council of South Australia, and property valuer Tom Reed, who teaches commercial property valuation as a tutor at the University of South Australia.
The co-founders came up with the idea around 18 months ago, after noticing that the tools that property valuers, financial institutions, and governments use to assess the value of properties don’t tend to consider how sustainability and energy efficiency impact their value.
“The friction point for us was that we found that when graduates are going out into the industry and looking at the built environment, particularly residential properties, there isn’t any education about how energy efficiency and climate impact actually affected the value of the property,” Todd tells The Fifth Estate.
Giving financial institutions the data they need
While developing the platform, Todd spoke with numerous financial services and insurance groups being able to find out what gaps they have for their mandatory reporting requirements.
Because there are so many properties where the sustainability data isn’t known, large financial services firms don’t have the aggregated data they need to be able to assess the climate-related risks that they’re carrying on their loan portfolio.
Additionally, a lot of larger organisations now have scope three reporting requirements for their supply chains. For banks, this includes the individual assets on their loan books, including residential properties.
“In the past, there has been no need for anyone from a regulatory or mandatory reporting perspective to have to know the energy efficiency or the carbon impacts of a residential property,” Todd says.
“But now there is a mandated requirement, called the task force for climate related financial disclosures (TCFD), which is asking large corporations, financial institutions to have to be able to report on individual residential properties at the asset level.”
Australia’s NatHERS rating system provides a systematic way for residential properties to be assessed. The issue, Todd says, is that around 78 per cent of homes on a loan portfolio currently in Australia were built before 2011, before the NatHERS standard was introduced.
“So we’re talking about millions of assets that exist within Australia today that there is little to no accurate climate related or impact related data regarding energy efficiency.
A massive market opportunity
The potential market opportunity for the platform is massive. Over the next three years, an estimated $1.4 trillion will be spent globally on residential home improvements.
Many of those renovations will be financed with a bank loan, or will require the property to undergo an insurance assessment.
“When an individual goes to their financier to be able to improve their property, we’re challenging the banks to make sure that any improvements that do occur also include a sustainability and an energy efficiency lens to it.
“If they aren’t making improvements that are going to de-risk the asset in the face of climate change, we are challenging the banks to say that we would really love to see those energy efficient measures incorporated into that process.”
Meanwhile, the app provides an opportunity to use human-centred design principles to educate and inspire homeowners to make their properties more sustainable, Todd says.
“If you can empower a householder to increase their energy efficiency, it saves them cash flow for their own household expenses on a weekly basis. That gives them the capacity to be able to continue to pay down their loans or other financial services products they have.”
Gearing up for launch and a big seed funding round
According to Todd, the startup aims to release a minimum viable product available later this year.
The platform was developed with support from Amazon Web Services and Adelaide’s Australian Institute for Machine Learning. Interns from the University of Adelaide and the University of South Australia helped with the AI and machine learning.
The team has also taken part in a number of prestigious incubator and accelerator programs. These programs include UBS’ sustainable finance challenge, the Global Open Finance Challenge, the ThincLab incubator program at the University of Adelaide, and the IAG Firemark Ventures program in Singapore.
The startup is currently in the middle of a seed funding round, with Todd promising some big venture capital and angel investment announcements in the coming weeks.
“As a female founder, it has been wonderful. I’ve done a lot of incubators, a lot of networking events to find out more about capital raising because certainly that’s been outside of my wheelhouse before entering the startup community,” Todd says.