Zero.

Most real estate funds treat decarbonization as a side conversation—a cost center to factor in after a deal is closed. Galvanize is doing things differently.

Joe Sumberg and Nicolette Jaze have built a fund where decarbonization is integrated from the start, as part of the value-add.

In our latest webinar, we explored how they’re structuring deals, planning CapEx, and aligning teams to execute without relying on speculative premiums or complex financing. Their model doesn’t rely on green bonds or C-PACE; rather, it’s built on fundamentals: lowering operating costs, increasing resilience, and protecting long-term market value.

Here’s what stood out to me in our conversation:

• Every asset they acquire is screened early using tools built by Galvanize’s in-house science team. Value-accretive decarb potential is gauged before an LOI ever goes out.
  
  
• Financial incentives are tied directly to carbon performance. Miss the decarb goals? Carry is off the table.
  
  
• Only profitable projects move forward. Nothing is modeled on future regulations or anticipated market shifts.

One thing that became clear in the conversation is that this isn’t a sustainability initiative riding alongside the investment strategy; it is the strategy. Every decision—acquisition, underwriting, capital planning—is made through a decarb lens.

This approach gives Galvanize a real advantage in today’s market. Older, inefficient assets with deferred maintenance are everywhere. Instead of seeing them as problems, Galvanize sees a field of opportunity. The more inefficiencies they can fix early—controls, envelope, mechanicals—the more immediate upside they can generate without depending on a buyer who cares about carbon.

By focusing on operational improvements first, they’re creating assets that outperform in traditional metrics (cost, resiliency, leasing) and happen to be lower-carbon as a result. That’s a critical distinction. It also explains why their acquisition strategy isn’t dependent on policies catching up, as the upgrade investments pencil out today.

If you’re looking for a real-world example of what it takes to prioritize decarbonization across the investment lifecycle, this is it.

👉 [Watch the full conversation here]

Q&A Highlights:

• Q: Are you leveraging green finance to fund the retrofits at all? If so, which ones are most effective for your model?
  
  • Joe: No. We have a conservative view of finance and debt capital structures, which leads us to use asset-level mortgages.  Lenders typically appreciate the capital that we are spending to decrease opex and increase resiliency, which can result in better overall terms. But we have not used C-Pace financing or green bonds as examples of green finance.
• Q: How do you approach underwriting capex plans/reserves at acquisition, given the focus on decarbonization? Do you have a typical hold period?
  
  • Joe: We have proprietary tools that we built over the course of the last few years that help the team identify, analyze, and underwrite sustainability initiatives. It is critical that these are contemplated and budgeted before IC approves the deal, well in advance of the acquisition. In our experience, the money needs to be budgeted and accounted for from day zero in order to accomplish our aggressive goals of profitable decarb.
• Q: When you cite alignment of all “participants” in a transaction, who are you referring to (e.g., tenants)? And how do you do this?
  
  • Nicolette: Rather than leaving sustainability execution to the sustainability professional to apply retroactively, alignment across the investment lifecycle, tied to long-term incentives, ensures that sustainability considerations are integrated from the start by all stakeholders. For instance, an acquisitions person will only source deals that have both strong real estate fundamentals and decarb potential, which leads to underwriting that has sustainability programs baked in, which means that the asset manager has capex to execute on sustainability, which means that the sustainability program is tee'd up for success from the start. We do this by using proprietary tools that have been built by our in-house scientists to gauge decarb potential early and upfront.
  • Joe: By tying our long-term economic incentives to the Galvanize Real Estate team, profitable decarbonization becomes a foundational element of how we source, execute, track, and report.  We believe that it is powerful to align the incentives of the CIO, Portfolio Manager, Acquisitions Team, Asset Management Team, Head of Sustainability, and the senior participants of the overall Galvanize firm.

This is what it looks like when decarbonization is built into the business model, not bolted on.

If your team is working through similar challenges—or trying to figure out how to budget and align around decarb from day one—let’s talk.

Until next time,

—Christopher

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