80%

Recycled Material

40-80% of IBP’s fiberglass insulation is made of recycled material and 75-85% of cellulose insulation is made from recycled waste paper

19.4%

CAGR

in revenue growth, 2014 - 2020

78.5

Million Dollar

in backlog at end of 2020, which is potential future revenue


The Path to Drawdown: Insulation

Buildings and construction account for about 38% of the total global CO2 emissions and 35% of total energy use. Much of this energy is used to heat and cool a home. A sizable amount of that energy (25-60%) is wasted through air infiltration, or heat escaping from warmer areas to cooler areas.

Better insulation of buildings can prevent that heat from escaping. Insulation is the use of high levels of improved materials in building envelopes that resist heat flow and regulate indoor temperatures. Ideally, insulation is continuous and covers all sides of a building, from the bottom floor, exterior walls, to the roof. Sealing gaps and cracks is also critical to a more thermal resistant building envelope.

Insulation is one of the most practical and cheapest ways to make buildings more energy efficient, both in new construction and through retrofitting older buildings that are often not well insulated. This also means lower utility bills, keeping out moisture, improving air quality and avoiding greenhouse gas emissions associated with energy use.

Project Drawdown estimates that, in 2018, 30% of buildings worldwide were insulated. If existing residential and commercial buildings in temperate and tropical countries can install insulation (with low carbon materials) at a rate of 1.6 - 2% every year, between 17 - 19 gigatons of GHG emissions can be avoided by 2050.

About

Installed Building Products (stock ticker: IBP) is one of the largest insulation installers in the residential new construction market in the United States and a leading installer of complementary products. Headquartered in Columbus, Ohio, they have more than 190 branches across 48 states and Washington, D.C.

IBP's Role in Drawdown

IBP sells a wide range of residential building products - waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors. But by far their largest business is the sale of insulation.

They offer three types of insulation (pp. 1-2): fiberglass, cellulose and spray foam. 83% of IBP insulation sales in 2019 was fiberglass, and 40-80% of their fiberglass insulation is made of recycled material.

Fiberglass insulation is made of fibrous glass that’s held together by a thermoset resin, creating insulating air pockets. It comes in either batts (also referred to as blankets) and loosefill.

Cellulose insulation is made primarily of paper and cardboard and has a very high recycled content. Cellulose insulation is only available in loosefill form. Cellulose insulation accounted for a much smaller share of their total sales - only 2%.

Spray foam insulation is generally a polyurethane foam. This is applied at a job site by mixing two chemical components together in specialized application equipment. It typically has the highest insulating value per inch and sealing effectiveness compared to the other insulation types, but it’s also the most expensive.

In all, IBP’s revenue has grown by an impressive 13.9% year-on-year since 2016.

IBP: What We Like

IBP has a strong track record of acquisitions that strengthened their position in the insulation industry. Just in the last year, they acquired:

  • Insulation Contractors/Magellan Insulation, which provides insulation, waterproofing and firestopping installations in Washington and Oregon
  • Two branches from Energy One America, which offer spray foam, fiberglass, and air barrier installation services to residential, multi-family and commercial customers

Royals Commercial Services, Inc, provider of spray foam insulation and thermal barrier installations throughout Maryland, Pennsylvania, Virginia, Delaware, and New Jersey

IBP: What We Want to See Improve

Disclose GHG Emissions


We appreciate IBP’s large role in enhancing energy efficiency in residential buildings through their insulation. But simply continuing to provide insulation is not enough to contribute to the fight against climate change. As of now, IBP doesn’t track and report their GHG emissions or even the amount of emissions they’ve helped avoid through their insulation sales. We urge IBP to disclose their direct and indirect emissions in an annual sustainability report.

Switch Emissions Reduction Targets


There is no evidence that IBP is making an effort at becoming a more sustainable company. IBP should set clear and ambiguous targets for reducing their GHG emissions by the end of this decade, and outline the steps they will take to achieve these goals.

Enhance Supplier Transparency


IBP’s three largest suppliers in aggregate accounted for ~37% of all material purchases in 2020 (p. 7). While they have a well-diversified supplier base and therefore have been resilient to supply chain shocks, we want to know the carbon footprint of their major suppliers. This is particularly because the manufacturing of insulation can be a source of substantial amount of GHG emissions.

Other Insulation Stocks in the Climate Index

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