Heating homes with wastewater, data centers and hockey rinks: Lessons from Zurich

The sustainability debate in business has become, like many issues nowadays, increasingly multi-polar. On one end is the perspective that markets reward virtue — that sustainability and superior returns go hand in hand. Then there is the techno-optimist camp, which sees ESG as a harmful distraction and believes that technology itself will automatically solve our challenges. Finally, there is the degrowth movement, which argues that the profit motive itself is at odds with planetary boundaries.

All of these perspectives carry some merit. All three lead to strategic dead ends.

There is another way, which is quietly making progress. Call it rational sustainability¹: an approach that acknowledges both opportunities and constraints, that builds profitable businesses while advancing decarbonization, and that neither romanticizes sacrifice nor pretends every green investment prints money.

Living in Zurich Höngg, I'm witnessing its success story in practice — and it's happening right beneath our feet.

Engineering heritage: From 1938 to today

Zurich's relationship with heat pump technology runs deep. In 1938, the Escher Wyss company installed Europe's first heat pump in Zurich's City Hall (Rathaus), drawing thermal energy directly from the River Limmat. It operated for 63 years until 2001.

Today's systems being built around the city scale that original vision by several orders of magnitude. The goal is to deliver the commitment for the city to achieve its target of “net zero” greenhouse gas emissions by 2040.

How my home is going to be heated by wastewater… and a hockey rink

I am living in West Zurich, which is currently a massive construction site. Streets are dug up one by one. The plan is to connect 30,000 households to a new district heating system, entirely replacing gas and oil boilers. The heat will be extracted from treated wastewater at the Werdhölzli treatment plant, where water temperatures range from approximately 11°C in winter to 25°C in summer. High-efficiency heat pumps powered primarily by renewable electricity will elevate this low-grade thermal energy to usable heating levels of 40-65°C, ultimately serving the heating needs of 30,000 households, without the need for any individual boilers. Heat pumps achieve coefficients of performance between 3 and 5 — meaning each kilowatt-hour of electricity generates three to five kilowatt-hours of useful heat. The cooled water then returns to the Limmat River, avoiding the disruption of biodiversity. The system will also capture direct waste heat from the sewage sludge incineration plant at temperatures of 70-80°C, which can be fed directly into the district heating network. In a particularly clever integration, waste heat from ice production at the Swiss Life Arena — home to the ZSC Lions hockey team- will be connected to the system. Like any fridge, the hockey stadium generates excess heat, which is going to be recovered to heat homes².

Figure 1. Altstetten-Höngg district heating network that will connect 30 000 homes to renewable heat by 2033. Source: ewz

Lake Zurich as a seasonal thermal battery

At the beginning of the Limmat River, Lake Zurich functions as a massive thermal reservoir. Ewz’s “CoolCity” project will draw water from 12 meters depth in the lake, utilising temperature differences to heat homes and offices, including Zurich’s financial district. In winter, heat exchangers will extract deeper, warmer water, which heat pumps will then upgrade to supply temperatures of approximately 67°C for district heating. In summer, the system is going to reverse: lake water at roughly 12°C will provide direct free cooling for commercial and office spaces, eliminating the need for electricity-intensive air conditioning during the (increasingly hot) summers.

The lake heating networks, when fully completed, will supply over 174 GWh of heating and 54 GWh of cooling annually³.

The patient capital imperative

The infrastructure of this scale and complexity doesn't materialize overnight. The Altstetten and Höngg project spans implementation periods from 2023 to 2033. Coolcity from 2024 to 2035. Such timelines require patient capital, well beyond the horizons of a typical equity or bond investor.

The city owns the utility company ewz, but it doesn’t simply finance its operations from the budget. Ewz operates as a standalone, profitable enterprise. In 2023, it reported revenue of CHF 1.57 billion and profit of CHF 370.5 million, delivering CHF 80 million cash dividend to the city treasury. This dividend alone corresponds to a 4.1% return on the city’s equity. The rest of the profit is reinvested in projects like this. When illiquid equity appreciation is included, the city's total return in 2023 was approximately 19%. Not bad for a boring utility.

Would EWZ be able to deliver better cash dividends to the city in the next 3-5 years if it didn’t make these huge Capex commitments? Most likely. Are these investments going to make ewz more valuable in 10 years? Also most likely. Is it worth doing to ensure a reliable energy and cooling supply in the future and meet Zurich’s decarbonisation objectives? Absolutely!

The shareholder (the city) agreed. In November 2022, city voters approved a CHF 573 million credit facility for thermal grid expansion with overwhelming support (the city parliament voted 107 to 14 in favor). In September 2024, voters approved another CHF 300 million for renewable energy investments with 82.86% support. Most recently, in 2025, the city proposed a CHF 2.26 billion framework credit to expand coverage from today's 33% to 60% of the city's residential area by 2040. This makes me optimistic about the future.

Integrating AI and data centers

The exponential growth in data center energy demand presents another integration opportunity. They generate large amounts of waste heat. Zurich's municipal energy plans explicitly identify waste heat from data centers as a renewable energy source alongside wastewater, lake water, and biomass⁴. Local residents in Glattbrugg are already using this resource. The technical requirements are straightforward: capture heat at source temperatures of 40-60°C and integrate it into district heating networks operating at similar temperature regimes.

These types of solutions need to be brought to other places and scaled up. Organizations that develop, operate, and finance these integrated systems — linking heat pumps, thermal storage, data infrastructure, and district networks — will achieve competitive advantages.

The key ingredients: Why it works here

Zurich's success isn't about choosing between profit and planet — it's about building systems that deliver both through deliberate structural choices. Several critical elements enable this:

Transparency and democratic mandates: City voters trust ewz and directly approve major capital investments. Strong infrastructure governance strengthens the connection between public investment and growth. Shareholders of public corporations could think and vote in a similar fashion if they trusted the management.

Owner alignment on time horizons: The city accepts 4.2% cash returns while ewz retains the great majority of profits for reinvestment. This alignment is explicit and transparent — voters understand they're building assets that deliver value over decades. This is also something that public shareholders could do more of.

Regulatory stability through ownership: Municipal ownership provides regulatory certainty. Coupled with full transparency over the finances, this lowers the cost of capital and enables optimization for long-term system value.

These ingredients are mutually reinforcing. Democratic legitimacy enables trust and patient ownership; patient ownership enables technical risk-taking; technical excellence generates long-term returns that justify continued investment.

Conclusion: The truth about sustainability and returns

Here's the uncomfortable truth that neither degrowth nor green growth advocates want to hear: sustainability and exceptional returns don't automatically go hand in hand. The idea that every green investment delivers superior financial performance is as misleading as the claim that all environmental protection destroys economic value.

But they're not mutually exclusive either. Zurich's energy transition demonstrates that decarbonization can be rational, scalable, and commercially viable when executed with technical competence and appropriate capital structures. EWZ generates 16-19% returns on capital while leading Switzerland's thermal energy transition.

Being a regulated monopoly backed by public capital helps, certainly. However, trust from the shareholders to approve long-term investments is paramount. There are many similar examples of rational sustainability around.

This is the first of several case studies examining rational sustainability in practice. The question for asset owners worldwide: will capital flow to these proven models, or keep chasing indices or the hottest new trend?

The author lives in Zurich Höngg and observes the city's energy transition firsthand. These observations reflect personal analysis and do not constitute investment advice.

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Sources

1. Edmans, A. 2024. “ Rational sustainability.” Journal of Applied Corporate Finance 36: 8–15. https://doi.org/10.1111/jacf.12609

2. https://www.ewz.ch/de/geschaeftskunden/immobilien/referenzen-projekte/altstetten-hoengg.html

3. https://www.ewz.ch/de/geschaeftskunden/immobilien/referenzen-projekte/seewasserverbunde-zuerichsee/coolcity.html

4. https://www.ewz.ch/en/about-ewz/sustainability/our-contribution/heat-supply.html