Air Quality Matters
Air Quality Matters inside our buildings and out.
This Podcast is about Indoor Air Quality, Outdoor Air Quality, Ventilation, and Health in our homes, workplaces, and education settings.
And we already have many of the tools we need to make a difference.
The conversations we have and how we share this knowledge is the key to our success.
We speak with the leaders at the heart of this sector about them and their work, innovation and where this is all going.
Air quality is the single most significant environmental risk we face to our health and wellbeing, and its impacts on us, our friends, our families, and society are profound.
From housing to the workplace, education to healthcare, the quality of the air we breathe matters.
Air Quality Matters
Air Quality Matters
#79 - Stefan Flagner: Clean Air Economics
The economic value of healthy buildings represents one of the greatest untapped frontiers in our quest for better indoor environments. While we've mastered the technical aspects of creating healthier spaces, convincing decision-makers to invest remains challenging without clear financial metrics.
Stefan Flagner, an economics researcher with a PhD spanning economics and health sciences, brings a unique perspective to this conversation. As co-author of "10 Questions Concerning the Economics of Indoor Environmental Quality in Buildings," Stefan explores how we can quantify and communicate the return on investment for healthy building initiatives. His research reveals we're at a critical juncture—similar to where energy efficiency stood two decades ago—where the business case exists but needs stronger articulation.
The discussion examines several fascinating aspects of this challenge: the split incentives between building owners and occupants, the difficulty in measuring productivity impacts across different industries, and the need for more robust field studies rather than relying solely on laboratory evidence. Stefan highlights how interdisciplinary approaches combining economics, engineering, and health sciences are essential yet surprisingly rare in research.
What makes this conversation particularly valuable is Stefan's focus on practical applications. Rather than targeting companies already investing in premium spaces, he emphasises reaching conservative business owners with limited capital who need hard numbers to justify investments. The path forward requires better data collection, post-occupancy evaluations, and tools that allow businesses to calculate potential returns based on their specific circumstances.
Ready to discover how the economics of healthy buildings could transform our approach to indoor environments? This episode provides crucial insights for anyone involved in building design, management, investment, or occupational health.
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Welcome back to Air Quality Matters. We already have the tools and knowledge we need to make a difference to the quality of the air we breathe in our built environment. The conversations we have and how we share what we know is the key to our success. I'm Simon Jones and coming up a conversation with Stefan Flagner, an economics researcher on healthy buildings With a PhD in economics and health sciences and co-author of a recent paper titled 10 Questions Concerning the Economics of Indoor Environmental Quality in Buildings. He was part of an interdisciplinary team of 11 experts from economics, health sciences and engineering. Their goal was to provide researchers and industry professionals with a comprehensive overview of the current scientific evidence on how and when investments in indoor air quality are economically beneficial. So I jumped at the chance to sit down with Stefan to talk about this critical part of the puzzle of unlocking healthy buildings. If you listen to the podcast, you know this is an important subject, key in gaining traction and one of the harder things to frame and communicate. It's a really interesting conversation that comes at the economic and, I suppose, the value of air quality, indoor environmental quality and health from yet another fascinating angle. I hope you enjoy the conversation. Please don't forget to check out the sponsors in the show notes and at airqualitymattersnet.
Simon:This is a conversation with Stefan Flagner. It's kind of the elevator pitch or the elevator question, which actually it was the first kind of the first question I asked you when we were talking originally, wasn't it? Is it from the economics perspective? I think it's fascinating, like, how do we actually show the value of healthy buildings to people, and not just to our own echo chamber, but actually to the people that really count, the people making financial decisions in buildings and investing in them and managing them? What, what does that process look like? Because we've started it, haven't we?
Stefan:but it's by no means the complete article as it stands yeah, I mean there is a lot of work to do in any regards.
Stefan:When we talked the first time, then we were just finishing up our 10 question paper, which is now, I think a week ago, was published.
Stefan:We actually tried to exactly, yeah, not give an answer to that question, but more reviewing current studies which have done or have contributed to this whole question, because at the end, the core question in which we talked about is how do we determine the economic value of making a building healthier?
Stefan:More than two decades old research talking about energy efficiency and the value behind that, one, which also seems to be much easier because there is this clear business case of you have a building and it's more energy efficient, so there is a reduction in costs, and then you can basically calculate me as a tenant, how much do I save from having a more energy efficient building, and compare that to the extra rent or the extra price I pay on that one. So it's very clearly easier to do compared to the healthy building part, and I feel that at the moment we are probably at the same level where we were maybe 20 years ago when it comes to energy efficiency, that we are at the very start, because now energy efficiency is like an established business case, but then for the health part that's a completely different story, and that's what we want to capture with our 10 question paper, by basically also starting and saying okay, which evidence is already out there which touch upon this whole question?
Simon:yeah, it's really interesting. You mentioned the green building movement because you're right, you know it's a, there's an established picture, we've got standards, we've got green building labels that are internationally recognized, um, and and if you look at the state of the art today, we've also got a lot of kind of taxonomy type structure around that whole thing. That really kind of starts to set the laws and the official language of how you determine that something is or isn't green or what the actual value of that is. And we're now moving towards even more sophisticated metrics of embodied carbon and circularity, and you know this stuff being embedded very heavily in legislation and regulation. So it's quite a mature sector in some ways, isn't it? Even though, like it doesn't seem it when you've lived through it.
Stefan:Actually, you're right, it is kind of 20 years old and a kind of a given, I suppose, in a lot of jurisdictions that a building is going to be built to a certain way it is a given and in terms of, we can use, I think, the knowledge we have from green buildings and making a business case as a blueprint for healthy buildings, although I must say the thing is like me personally, I see healthy buildings as integrated within green buildings, because if you make a building healthier, that can also or will have an effect on your energy efficiency to a certain extent, right? So the question is also a little bit number one if I make a building healthy, do I maybe have, for some reason, a higher or lower energy efficiency? Right? Maybe I have higher energy consumption? And then the second one is this extra cost which I would put into place. Would they be offset by the benefits of a healthy building?
Stefan:But then, on the other hand, what find really really difficult at the moment is to and that's where the whole research is struggling, I think is how do we quantify the effects of a healthy building? And even if we structure that by saying we have this productivity part, we have this productivity part, we have the health part and we have the well-being part, and let's say these are the three main categories which are then affected by the healthy building or affected by having a good indoor environment, let it be good air quality, let it be a thermally comfortable environment. Then the question is what is productivity? What is health? How do we base metrics on that one? And then the other question is also what building type are we talking about here? So productivity in a manufacturing hall is completely different than in a service company which has offices, which then again is completely different than in a school.
Stefan:So I feel like, while energy efficiency is very clear in terms of you know who pays the energy bill, you know who benefits from it, right, when it comes to health, when it comes to to productivity or well-being, we first, I think, really need to ask ourselves benefit for whom? For which stakeholder? Right for the investor, for the owner, for the government. And that also leads to the second question, which is for which building? So I find it much harder to have this one specific framework where we say this is the economic value of a healthy building and then apply that to a school or a hospital or an office building or residential building it. It makes it much harder yeah, I mean.
Simon:I mean there is a clear distinction in the metrics being human centered or or building centered. I get that. Um, I suppose when you unpack the energy side of things, there's always been a complexity there as well, and I guess they've struggled with many of the same questions that you have with a healthy building, in that there are split incentives, there are co-benefits, there are macro environmental influences, there are macro environmental influences, there are. There's a whole. It's a complex mix, even energy, you know. Yes, there's a straight line. If I make a building more energy efficient, somebody pays less for the energy of that building. But even those straight lines aren't straight Sometimes. Sometimes you just make a building more affordable to heat to the right level, so sometimes you might not actually save any money, you just make a building more comfortable and we've seen that a lot with poor performing buildings. Actually the emissions don't go down, the comfort goes up or the usability of the space changes in some way. So it's important that we don't say it's easy on the energy side. But I think what the energy has always had is some pretty clear straight lines to things like energy savings, to calculating carbon emissions and so on. The cell has always been complicated and to who, and it's built up ahead of steam over those 20 years where more increasingly, more and more buildings are looking for certain standard and now regulations by default are probably where we hoped we'd be 20 years ago. You know we're building pretty good buildings if they're code compliant, but but this human performance thing is complex and you don't live in the bubble, it's not.
Simon:You know I've had this conversation with you. You know we've read healthy buildings. We know Joseph Allen's work. You know there are these kind of metrics that float around for cognitive performance, absenteeism, the 330-300 rule, like we're describing it already. But, as I pointed out to Joe and have had plenty of conversations with others in this space, it's all a bit woolly at the moment, isn't it? It's very difficult at an economics level, at an roi level, at a business case level, to to stand over that at the moment. It's it's in the world of academia and and research and questionnaires and cog effect studies. That's no good to business. Largely, what you're asking them to do is believe you, and business doesn't operate very well like that, does it?
Stefan:No, no, no. You hit exactly the most important point, which is also the point we make in our 10 questions paper, that we say the assumptions and the statements at the moment from different stakeholders saying healthy building is economically valuable. If you look into the details, if you look into the studies which are actually used in order to make that claim, from a research, scientific point of view, it's very thin Thin in terms of there is not actually a lot of baseline studies which looked at it, and then also most of the papers which say that they provide evidence. If you look deeper into the actual papers, it's mostly estimations, and that is exactly the question, right? So if I go to an asset manager in, let it be germany, which is also currently economically not doing the best, right? So they have limited capital and they have to categorize where do they put their money in? They have, as you say, they have the regulation of I need to be more energy efficient. And now you come around and, based on like thin evidence, tell me that also making it healthy, you know will get a benefit from me, but you cannot really tell me how I can make that, monetize that benefit, how I can make it tangible. Why should they invest in it? I mean from a business point of view.
Stefan:I think it's not very convincing yet. And I don't say that the evidence which is out there is wrong, not at all. It's more that there is not enough and there is so much more which still needs to be done. I mean, three weeks ago there was one paper from Katarina, mina minkoff and franz first from university of cambridge, and that so far is the first paper which looked into if you certify a building for well and for fit well, is there an economic return from that one which they showed in the paper? There is.
Stefan:But they also showed that other factors outside of the indoor environment play also an important role in determining the, the rental premium, the rental revenue for them. And then I find interesting but that's like the first paper I'm aware of where I can say they really used empirical analysis and not just estimations and they really observed the difference between the healthy and the non-healthy building. And then again, it is for the well-certified building, for the well certification. It doesn't tell us yet where this premium comes from. Right, because well entiles air quality, thermal comfort, safety and service, making it a movement and, yeah, making it a building, which building where people can move a lot? So there are all these different categories and then again we don't know what is the category which drives this higher rent which we observe it.
Stefan:Yes, but you need to know that for a business case right.
Simon:Yeah, yeah, let's break down the revenue side of it a little bit. So when we talk about adding economic value to an organization or a building for me by making it healthy, there's the. There's the what I can charge for rent element of it. So is this building, because of the things that I've done to it, going to get a premium over and above the other buildings that haven't? So there's the core value of the asset, whether that's split incentives where a building owner can charge more rent, or the asset retains more value because it was owner-occupied and when they eventually sell it or do something with it, it would have more value as a result.
Simon:So there's that side of it and that's probably an easier equivalence, I guess, to the green building movement. If I have a well standard or a badge of some description, or it's met a certain code that says this is a high performing building, that's pretty sensible. To me. That sounds like a pretty straight line. You know, this is a better building than the one next door. Therefore, I can charge more rent for you living here, um, so there's that. There's that side isn't there and that that's pretty straightforward ish yes and no.
Stefan:Right, it is straightforward in terms of you do the same which you did with the literature about energy efficiency, right? So you see, I have a building. It's lead certified, it's very energy efficient. I have buildings in the surrounding. So any variation due to the location I control for that one and I see similar buildings in the surrounding. So any variation due to the location I control for that one and I see similar buildings in the surrounding are not certified with energy efficiency. So there is less rent, less price. Now I do the same for wealth. So in that regard it's very straightforward.
Stefan:But then again, the question is also a little bit where does that come from? If I, as a business owner, want to rent a building and I have to choose between a well-certified and a non-well-certified building, from a homo economicus, rational point of view, I would only rent the well-certified building with a higher rent if I know that this extra premium I pay is somehow offset by some benefit for me as a tenant, right For the energy bill. That is clear, because I say, okay, I pay 5% higher rent, but it's so energy efficient that my energy bill is 10% lower. Simply speaking, I win. But then, when it comes to healthy buildings, the tenant will ask okay, the health or the productivity? What does it mean? And that is also hard to determine. Health is less hard to determine than productivity, maybe because productivity really also depends on what business are we talking about? In which sector is this tenant operating? What does it mean for this tenant to be more productive? And how does it translate right?
Simon:yeah, and and also, when we talk about this premium between a well-certified space or a lead certified building and something that's not, I think naturally our mind tends to picture the extreme. You know we've all been in spaces that are just dreadful right and you can understand how a beautifully light, well-lit, thermally comfortable, lots of ergonomic and access to nature design and you know all of these wonderful things is going to be a delight and a premium compared to low ceiling tiles, badly lit, flickering lights, beige floor tiles you know we've all been and worked in one of those spaces. But that's not the choices being faced out there. In real estate, you can have two buildings right next to each other, one lead certified and one not, and both look fabulous. You know the initial experience of going into a lesser performing building.
Simon:When you're looking to rent and lease that building. It may be very difficult to see. You know, in fact, there might be other things being offered in the less high performing building that you're not getting, or perhaps compromises that you're not getting, uh, or perhaps compromises that you're having to make in the the more certified building than the other one. So it's not that. You know the differences can be quite subtle. So it's not. It's not an obvious choice for people and, like you say, if one is charging, I think you you put some percentages down there, but 6%, 7%, 5%, 6%, 7% rent premium for a healthy building or a high-performing building. That could be the difference between choosing one over the other.
Stefan:And then the question is a little bit and I think the energy efficiency and green building it has an advantage because it's majorly boosted by regulations, especially in the last few years, right, yeah, so at one point the discussion about do I want to invest in energy efficient billing, yes or no?
Stefan:as an investor, I might not even ask that to myself anymore because I have to comply to new regulations. But that's not seen with healthy buildings yet so far, which is also surprising for me Because latest after COVID-19, you would maybe expect, at least when it comes to health, some kind of regulation saying, okay, you as a commercial tenant, you as a business owner, in terms of occupational health management, you also have to take care of, for example, the air quality and the ventilation rate there to make sure that you control the sickness absence and the spread of airborne infections of your people. And that is not seen and that I find very interesting that from a high-level political point of view, there is a very strong discussion about energy efficiency, for good reasons, but there's really no discussion about the health part of it and how to combine that yeah it's.
Simon:It's interesting what you say there. If you've been able to mentally unpack that. What, what the subtle differences are from that top down view. Um, like you say, some of it's regulatory driven right, so some of it is a risk thing. Building owners or people making decisions are looking at this through the risk lens. I I might come under something shortly. That puts this building under pressure. It might be valued less when it goes up for rent or um I might have a requirement for energy efficiency that I'll struggle to me need meet. Um, like there's probably quite a few kind of risk things are coming in from the energy efficiency side of things that aren't yet in the healthy buildings that perhaps should. Um, is it? Is it that kind of thing that you see?
Stefan:Yeah, there is a.
Stefan:Well, there is a question of risk mitigation, right, when we talk, maybe, about health, but then the question is more, is that maybe mainly the case for the very extreme cases? So, if you talk about the very bad buildings with very bad ventilation where sickness absence is really that high that we need to do something against that, probably for the 80 of the buildings, that's. That's less important. It's also a question of prioritizing. So if my ultimate aim would be that I want to improve the health of my employees sitting in that building because I'm an occupational health manager, right, then the question is also a little bit what are the main factors driving high sickness absence? And it could be because of airborne infection, but it could be also because of organizational issues, right. Could be because there is a boss there who is not a good leader or doesn't have good leadership skills, whatever, and that's why the people there are more often sick because of mental health issues rather than physical ones, right? So then air quality makes less of a difference. So it's a little bit. I miss a discussion of prioritizing that. I miss a discussion of prioritizing that. What I found interesting is and that is because now I'm an economist so I'm coming from economics try to add my viewpoint into this whole healthy building, indoor environment quality field, which is mainly driven by engineers for good reasons. And what I find very interesting, that if we look at the field of economics and especially finance, since years since also more than a decade which is the Sustainability Accounting Standard? I think they already 10 years or longer ago they had already their materiality metrics where they had different industries, and then they basically asked themselves if you want to invest into sustainability, if you want to invest into the E, the environmental part, for which industry which investments most material? And then I find an interesting discussion because that means it's a little bit tailor-made. And by now, if you talk with people in the industry, if you talk with the real estate investors or even banks, there is a very clear idea of how to generate economic value from the E in ESG, which is what they want. We moved away from the story of you need to invest to be more environmentally friendly but it's a waste of money. Now, with a lot of research, we moved into the direction of saying no, if you invest into environmentally friendly buildings or products, there is actually a competitive advantage you can make. There is certain materiality which is affecting your business. Let it be risk, or let it be that you have this competitive advantage. But then when you talk with these industry practitioners, they all tell you that for S they have no clue. For E they know there is a clear business case, for S not.
Stefan:This is where healthy buildings comes into place. Right, because healthy building is basically asking if I as a company invest into the social part of my company, into my employees, what's the benefit from that? And I find it very surprising that on one hand, we have this research from the finance side about the ESG part, and then we have this research from the engineering side about healthy buildings, but there is no communication. It's like the essence they talk about the same things, they have the same questions, even that they think it's different questions. So it would be so easy to merge, but interdisciplinary research between these two fields is not given. But I really think that this is the key to actually have a solid answer to the question what's the economic value of healthy buildings? By bringing an engineer, a health scientist, any economist together and really work in that regards. And that didn't happen yet in research.
Simon:Yeah, and, like you say, on the healthy building side of it, we're starting to see the legislation and the rules starting to form around air quality and healthy building. We're starting to see codes of practice for indoor air quality, and so we're from the from the top down. We're starting to see the frameworks being developed the energy performance of building directive starting to talk about, um, you know, em 16798 starting to talk about various air quality parameters. We're seeing the same in ashray much more focus on health and harm outcomes and so on. So some of those building blocks are developing in the same way that we saw that with sustainability.
Simon:And you're right I've been saying this for a while recently is that we've been treating this problem as an engineering problem, and it's not. We know how to create a healthy building. It's not an engineering conundrum, not like we. We know how to create a healthy building. It's not an engineering conundrum, no, and we know enough about air quality, even though there's lots to know. We know enough about air quality to know what to be concerned about. That the big frontiers is is how you sell. This is the people, the peopling part of it. And you're absolutely right with sustainability, those materiality assessments that are so prolific within the ESG world, where you fundamentally understand at a business level what's important to the internal and external stakeholders when it comes to energy performance. S is in there's. It's pretty light, you know, um, but we don't do that when we're pitching healthy buildings, not in the same way, um.
Stefan:So you're right, there's probably a lot to learn actually in how those two mesh I mean and I have to say that because I come from an interdisciplinary background right, I was an economist who also worked with human physiologists, so I saw firsthand what I know and what I don't know. But I also saw that at the end, you have two completely different fields health science and economics in the essence talking about the same question. In that regards, I also must say that the question about materiality, the question about the cost and benefits, I think is even more important now than it was a couple of years ago, because, after having this move of a lot of companies wanting to do something in terms of sustainability, also promoting their ESG investments, but sometimes also what they call greenwashing not really being effective there, there is now this discussion going on, especially among large asset managers like you name it, blackrock, for example, right, big pension funds who now need to ask themselves at the bottom line, they have a certain duty towards their shareholders to minimize the risk and deliver a good return. Pension fund is a good example, because pension funds need to invest in equity. They need to invest also a small part into real estate. Invest in equity, they need to invest also a small part into real estate, right?
Stefan:So then their question is how do I manage my risk? Because I have this duty towards the people who pay into my pension fund because in 40 years, when they go and retire, they need to get that money and I think that is not a hindrance to invest in healthy building. But that's a chance to open up this whole discussion of saying, okay, us pension fund should invest in healthy buildings because there is an actual return or there is a lower risk. In some regards, there is a materiality from investing in esg and you can do it in a way where you still fulfill your duty towards your shareholders. I think that is a very important discussion which is not yet done, probably because of what you say. This mix of different fields engineering, economics, health science, policymaking it's not there. There is not enough.
Simon:In research, interdisciplinary research, there's not enough, yet for some reason, yeah, and a lot within sustainability is about not to confuse terminology here but materials about products, energy resources, that kind of thing. A lot of what we're talking about here is on people. A lot of what we're talking about here is on people. And if we thought sustainability and scope, three emissions were complicated, you wait till you get into, um, cognitive performance and absenteeism and presenteeism and delight and human behavior and perception and framing and behavior and like it's a queer old space to try and quantify. And that's what you're really talking about from a pension funds perspective is somebody wants to. It's a show me the money Like it's. I need the data.
Simon:And one of the things we don't have the luxury of, I don't think with healthy buildings is the luxury of being able to present this in vanilla sustainability reports like greenwashing, like we got away with for decades really in the green movement. Everybody's beyond that now. They want hard numbers, they want data, um, and that's a different proposition. In healthy buildings, um, we can say a material like you say. We can say a material is healthy. We can say a ventilation system is performing well, but how somebody justifies an investment into that or how somebody justifies a fund investing in that is a totally different beast, I guess absolutely, and the the.
Stefan:What I find also interesting is if you look, for example, at the economic literature, like the economic studies which were done over the last years, you see some convincing empirical studies when it comes to outdoor conditions, for example outdoor air pollution. So if you would ask some of the scientists in the real estate finance field about can outdoor air pollution affect somehow the valuation of the property, they would show you a couple of studies in that regards the valuation of the property. They would show you a couple of studies in that regards. And then again the question is and I can imagine why then the question is again if we know that from these studies, outdoor air pollution might have a negative effect on the valuation and therefore on the valuation of your building, which leads up to the valuation of your portfolio as an asset manager right, so you should care about air pollution because it diminishes your return, right Then my natural question would be what can we do against it?
Stefan:As an asset manager, as a building owner, I cannot change the outdoor air pollution where I am. This is like basically tied to the location, but I can change the indoor air pollution where I am. This is like basically tied to the location. But I can change the indoor air quality right. That is what I have in power. So the question is, if I improve the indoor air quality, especially in a building or in a location where the air pollution is very high, can I maybe offset this negative effect on which the air pollution outside has on my building right? Can I use it as a resilience factor?
Simon:I was just going to say resilience, because resilience is a familiar language in economics. So you know that particularly companies above a certain size are having to non-financially report on resilience of portfolios and stock because of climate change and all sorts of other risks flooding risks and so on. So factoring in environmental risk into resilience is something that people that are managing portfolios have in their language. At least don't they.
Stefan:They have, because then we talk, for example, also about climate risk. Right, we can, instead of air pollution, we can use heat waves as another thing where we can actually have a discussion about climate risk and the changing environment due to climate change, which at the end, is a business risk. And then you have a different discussion with an asset manager, right, because you tell him it is a risk for your business, it is a risk for the performance of your portfolio, so you should care about it. But then obviously he would ask what can I do against that one? And then healthy building can be one of these examples, although I also must say, from a research point of view, I think one of the reasons why a study has not been done yet, comparing indoor air quality and outdoor air pollution yet, is because data availability is not there so far.
Stefan:Right, so measuring outdoor air pollution became better over the years, but with indoor air quality we are still not there yet. It's not like there's a big data set and I can download indoor air quality for a thousand office buildings all over Europe and compare that one. So that is an issue in terms of even if you would have, as researchers, the idea to examine that. The question is how do we get the data? And I think that's where we need a discussion with the industry in order to have access to the data, to increase the availability of measuring indoor air quality, because that allows us to determine exactly these questions yeah, and it doesn't take a big mental leap to know what pushes economists' buttons, and there's nothing like a big spreadsheet of numbers for them to be able to see the world through.
Simon:It's like the Matrix, you know, like economists need spreadsheets, like that's probably a very, very real and very important point is that money makes the world go round, and if we want the world to go round in the right way, we need to get the numbers in front of the people that are making that happen. And what you're saying is is that we have those numbers with with air, with outdoor air pollution, and so people can make some decisions on assets based on those numbers, but there just isn't the data as we look out at it today, where economists or investors or portfolio managers, or whoever it is that are influencing decisions, can look at numbers and compare a, b and c.
Stefan:that's the that's the challenge I mean, if you, if you think about it, if you are, if you manage a big portfolio of real estate, you know the location and you probably will get some kind of weather data about temperature, about air pollution, auto air pollution very quickly, right? So it's publicly available data. It's not a big deal. But let's say you would ask yourself okay, I want to see if air pollution has an effect on the value of these buildings. I can see at the end, very simply spoken, that the buildings in a highly polluted area have lower rent and a lower price. But maybe in the data what you also see, some outliers. So you see some buildings for some reason they still have a very good rent or they have a good sales price, even that they're in a highly polluted area you don't know why, but in average there is a negative effect.
Stefan:right, but maybe these outliers is exactly what you want to look at, because then you want to exactly understand. Okay, there are these buildings that perform very well from a business kind of view despite being in a highly polluted area. Why, what is going on in these buildings in order to make them more resilient at the end?
Simon:And that's what you found when you looked at studies in this area that most of the conclusions that were being drawn were based around exploitation of data and not hard, direct data from spaces. They were making leaps between spaces because you just didn't have the granularity to draw straight lines.
Stefan:Yeah, I mean, if you look at the again, if you look at the actual studies on which this whole, all these claims, are based on saying that healthy billing has an economic value because it improves health or it reduces sickness absence or it increases productivity. If you look at the actual studies on which these statements are based on, the vast majority of studies are laboratory studies which are done in the lab, which is very good, which is what you need to do, because you need a lab in the first case to really understand. I change this one factor, I keep everything the same and then I see what happens with my productivity right. But it's a whole different discussion to use these results from a laboratory point of view and generalize them to the field. Right, if I put people in a lab and I give them a cognition test and I can see if the air quality is bad, they perform less well in this cognition test, okay, that's very interesting.
Stefan:But then now I also want to see in real life, with real office workers doing actual work, do I see the same effect? And this is where it's getting tricky, because this is where the question is. Then again, okay, you cannot give them a cognitive test. How do you measure productivity right Depends on the industry again. But this is very essential to move these lab study results and see can we find them at field studies as well. And I think the key point there is really having a lot of data availability to connect it at the end, because that is, I think, needed.
Simon:Yeah, so where you lack data on one side, if you can support it with a lot of data on the other side, it makes the interpretations a little bit more easy.
Simon:Have you seen any Any interesting examples where these kind of softer benefits are materializing in field studies?
Simon:Well, because it's been hinted at but I've not seen it practically implemented call centers and things like that, where in the background you might be able to be making big data observations of how quickly people react to calls or make a decision on something, or you know, I think, at scale in a kind of a knowledge economy space, through data you might be able to capture some, some of the elements of decision making, risk taking, performance, outcomes. Um, you know, imagine places like the finance world and things like that, where there's a lot of kind of a lot of number crunching and investment and where stuff's all done through software and tools that you could perhaps pick up some of that information. But pretty much every time I've seen it it's been somebody has to pick up an app at the end of the day, or log on to something and do a street test or something to try, and you know judge how tired they feel. You know, whatever it is, it's, it seems, it just seems very hard work in the field to be able to actually capture this.
Stefan:I am aware of some studies who try to do that. There is one study about I forgot the author's name, but it's a rather old but very good study about air quality and, I think, in the farming sector and the actual outcome from how much the peer pickers, how many peers or apples they can pick, and how that is correlated with air pollution, which is again a matter that we have discussion also about in a manufacturing setting. It's very easy to determine that. One very interesting study looked at a garment clothing factory and they changed the lightning to LED lightning, which then radiated less heat, and they could really see how the actual output of finished clothing parts is increasing because it's less hot. So that's a very clear baseline. And again, because now suddenly I know very clearly, this is the investment I need to put in in order to have my led lamps there, this is the energy savings I have and this is also how many more products my workers will produce, which translates in certain revenues very clear from a manufacturing point of view. Which translates in certain revenues. Very clear from a manufacturing point of view.
Stefan:As soon as it comes to office work and so-called knowledge worker, it becomes more fuzzy because how, yeah, in terms of call center, you can discuss and say a call center worker is more productive, it picks up more phone calls right. But then it could be also that it picks up more phone calls right. But then it could be also that it picks up more phone calls but the phone calls are shorter. So maybe customer satisfaction is going down because they don't really solve the problems. So it's finding the right metrics here. There are some studies who who do that.
Simon:Quite well, there needs to be done more yeah, and to to argue a point that perhaps someone like joseph allen would make, and in fact he did kind of press me on this when I was talking to him. He was saying true, but but even if we were out by five percent, like if we thought productivity could improve by ten percent, even if we were out by fifty percent and it's only five percent instead of ten percent the gains under this kind of 33300 rule are so big compared to reducing your energy by 10% or something that it's a no-brainer anyway. So you can get caught up in the detail. But if the gains are so good and it's reflective of your entire workforce, then how precise do you need to be? Does it ever need to come out of a lab and into the field? Like you know and I get that point I'm just not sure that lands, and I would argue it probably doesn't, because otherwise I think we'd have seen more traction in the marketplace for healthy buildings than we have. Um, because I I think ultimately somebody's going to want to see a spreadsheet or something at the end of a year to say this was the gain that we got from this measure, and that's just incredibly difficult to determine. Plus, there's a couple of confounding factors we have to talk about, particularly with economic performance of a business is you could do everything right and trump only has to up the tariff by five percent and you're all of that's blown out the water. So business operates in the very complicated world at the best of times, um, so you know it's very it's a noisy space to argue your case in. It is one of the first big problems, um, and the other problem is and this was the conversation I was having with robert bean about indoor environmental quality is it's hard enough to draw the lines of a benefit with, just say, air quality.
Simon:You introduce acoustics and lighting and thermal comfort into that. What was it that got you the game? Because a lot of the studies at the moment seem to suggest thermal comfort is probably a bigger influence on productivity than air quality. Um, now, thermal comfort isn't going to introduce a risk in the same way that air quality does. You know you're not going to be, for aldehyde is a carcinogen. Another degree of temperature isn't um. So there's that side to air quality.
Simon:But from a performance metric perspective, like from a cognitive performance and a measurable performance on the shop floor, you know lighting and acoustics and and thermal comfort are likely to have as big an impact as air quality on performance. So how do you determine that improving the filters from MERV 8 to MERV 13 has made any measurable difference, unless you did it completely in isolation of any other improvement, and that's often not how healthy buildings work. Generally, you're doing a number of things at the same time. So what was it? Was it the lighting? Was it the fact that less people were cold? Was it the fact that they could hear each other better and therefore less tired at the end of the day and therefore perform better? It's a really messy space to try and pull an answer out of, isn't it?
Stefan:Yeah. So we had two thoughts on these ones or two things we touched on. I will talk about thermal comfort in a bit. The first thing. So, with regards to what Joseph Allen said, I completely agree in terms of even if we have an estimation of 10% and we are off by 8%, 2% is still something right. So, yes, we can have a discussion about how precise these estimations are. But he makes a point of saying maybe that's a rather scientific study, but for the field or for the practice, it doesn't matter so much. But then I also must add to that one that I think the people and the business owners who care about sustainability, they don't need to be convinced by that because they're anyways convinced. They would anyways do these investments, maybe even if they would know that they are wasting some money in that regards, because they care about sustainability. It's much more interesting to tackle the big players, players like BlackRock, for example, who acknowledge that they have a certain duty to their shareholders. So, even if they would believe in this, they need to show their shareholders some hard numbers, and these are the people who are very critical. But if these are the people who we can get and that's what we did, for example, with energy efficiency, where we said I don't care if you believe in climate change or sustainability, but you see that you can create value and a higher return from energy efficiency. That's an interesting discussion to have for thermal comfort and regarding the second thing you you touched up on with regards to what is it is it air quality, maybe it's temperature, maybe it it's light, right, that's also what I said earlier a little bit. We need to find some feeling of prioritization.
Stefan:If we have limited capital, which is most of the times the case so I have a building, I cannot fully well certify it to the full package. I can only do two things. What should I do? Should I focus on the thermal comfort? Should I focus on the air quality? Should I focus on the light? Right. So having some guidelines there for practitioners to say depending on, for example, saying, okay, you building is in a very highly polluted area, so yes, you should invest into the air quality, filtration and ventilation system, but if your building is outside on the farmland, where air quality is very good, then it's a different story. Then maybe take care of the lightning, right. So having a little bit this understanding of the tailor-made approach can, I think enable a lot of investors, a lot of owners who have not the money to do the full package, the full well package, but still would be interested in in approving certain aspects of that. I think that is a very interesting discussion to have yeah, that's really interesting that you say that.
Simon:And the reality of the built environment is so much of it is not in a position to be going after a well standard right. Most built, most businesses are just trying to get by, survive, manage the asset as best they can or manage rent premiums as best they can and so on. There's not a lot of control out there in the vast majority of the built environment, but that's where the low-hanging fruit often is. That's where the poor-performing. There's only so much you're going to improve in a Deloitte headquarters buildings in New Yorkork. It's probably already a pretty fantastic building. You know, like a lot of this is just rubber stamping what's already very good buildings.
Simon:What we, what I'm interested in is how we convince businesses that have got offices above warehouses in the Midwest, above industrial estates, or you know, offices above high street shops in the center of Germany, or you know there's so much of the built environment that's not that fancy and very basic and with limited funds, where do you direct resources?
Simon:And that's a really interesting one, and the risk I suppose in what you're saying is the risk of kind of doing everything a little bit is you'll find it impossible to quantify what made a difference, if it made a difference at all.
Simon:Right, so you're far better off directing your resources to one pot or another. So at least get a measurable outcome that you can say whether it was worth it or not. Um, the problem, then, is you're competing. You have to accept, then, that some buildings, even though they probably should do something with ventilation, actually might do lighting this year or this decade right, like that's. That's the kind of hard world you're in, at that point where, all of a sudden, you're saying, well, look, yeah, if ever, if we try and convince everybody to do everything around indoor environmental quality a little bit, you might struggle to prove the case that what they've invested in actually made a measurable difference. And if it did, what was it that did it? Um, whereas if you went hard after one thing you might at least be able to show you'd be able to say, well, that was the quantifiable difference of doing that thing.
Stefan:Um, that's a difficult one, that one and the, and now adding to the complexity of thermal comfort and lightning, for example, right, if we talk, let's talk about lightning, we have to talk about circadian rhythm and we have to talk about all the health, all the medical research which connect circadian alignment. So the alignment of your inner clock with so many health outcomes, right? Or the alignment of your inner clock with so many health outcomes right. By now there are so many epidemiological studies who show that there is a higher cancer rate, for example, for shift workers, because their inner clock, their circadian rhythm, is completely messed up due to their work. Basically, right. Which then again also means if we want to improve the lightning, the first question I would ask is for whom?
Stefan:For an office worker who's sitting from nine to five in the office, then it's easy, then I know I have a certain circadian lightning curve which I have to follow. But is it for a shift worker? Then it's a different story and we make that point in our 10 question paper. It's a different story and we make that point in our 10 question paper. Frank Scher from Harvard Medical School makes actually that point, where he also talks about well, if you have shift workers in the hospital in the night. Yes, you can improve the lightning up to a point where it is beneficial for their circadian clock, for the inner clock, but then you have to understand in which rhythm they are, because you also want them to be highly alert at night to do their job well, right. So then it becomes the question of how do you balance health? How do?
Stefan:you balance performance here right, which is much harder for shift work. Thermal comfort is a completely different thing. There is this whole idea that human beings need to be thermally comfortable all the time and need to be in stable temperature levels. But if you then talk with human physiologists, they would say no, they would say we need to be exposed to a little bit colder or a little bit hotter environments because we need to build up our resilience. There is a physiological acclimatization effect from that one. So then the question is if I know that in one week there is a heat wave coming right.
Stefan:Most the current idea is the heat wave is coming, I need to put my AC units on because I need to protect my people against the heat wave is coming. I need to put my ac units on because I need to protect my people against the heat wave, while physiologists and and my team in maastricht, led by my hannah palubinsky, they did this very good work showing that, no, you can get people in advance to heat wave, acclimatized to the heat so that when the heat wave comes, their body can deal better with that, their body can adapt to that one. So that is a very interesting discussion, making it a more complex problem right. But then that's for me also a discussion of you can connect it to energy efficiency again, if I can tell then a business owner and say there's a heat wave coming, put your AC unit from 19 degrees or 21 degrees gradually up to 25 degrees. People will still be comfortable if you do it from day to day, because they will get used to that one and you save energy.
Stefan:But why is it not done? Because of risk aversion. As a property owner, I rather want to have my people be thermally comfortable, because it's way too risky to do this weird experiment where I ramp up the temperature and then I might have people complaining that it's too warm here, and this is like a fear which we need to get out of that as well. Right, we need to, and that's again. We need this very good studies. We need this very good field studies. We need forerunners so that we can have a case of saying look, it is possible, if they can do it, you can do it as well, but it adds up to the whole complexity.
Simon:While I have you, I just want to briefly talk to you about Ultra Protect, a partner of this podcast. Look, they're not here by accident. Like the podcast, they are passionate about driving changes in our indoor environment and are an all-round great company to deal with. They have years of experience in the industry and a team of people I have leaned on on many an occasion for advice and insight. From continuously tracking air quality to specific sampling, they analyze and provide actionable insights for the built environment. Specializing in dust management, they provide amazing products and services that minimize risk and improve environments, from construction sites to offices, to manufacturing settings, through to solutions around ventilation aimed at improving the environment in the long term. It's a company well worth checking out. There are links in the show notes and on air quality matters sites and, of course, at ultra protect uk. Now back to the podcast.
Simon:It kind of sounds like you're saying that there's a lot of knowledge out there, but to really make hard decisions at the coalface, people need a lot more data than we're currently being presented with. That's the fundamental challenge here is that I can point to a Harvard this study and a Gratz that study and a DTU this study, and so on and so forth, but at the end of the day, you need to be almost overwhelmed with that. We often say in communications it's only when you are bored hearing yourself repeating the same thing do you then go again because you're still nowhere near. You know creating a resonance for people that aren't in your space. And so the fear from within our sector is is that we say well, look, the answers are there, we know, but the trouble is we need study upon study. This just needs to be driven home, and you need mountains of data so that people are comfortable to make those decisions, that it's not just this one study here or that study there, that it becomes irrefutable, really, and obvious.
Stefan:And we need collaborations, right, we need an asset manager who says, okay, listen, I have 500 buildings in Europe, I allow you to install some sensors for air quality or whatever, because I want to know, right, I really want to know is there a business case I can do? And then it's a chicken or egg problem. He will only do it if you can convince him with certain research. Right, but you need to do it with him first in order to have convincing research. So this is and I feel like the whole field of healthy billing is exactly at that point we are. It's a little bit at this threshold at the moment and it's very volatile. What's going on? And in three or four years we might suddenly hit it off, because then beta availability is there and there is a general understanding, or in three or four years we might have the exact same discussions we have now. But I think we are in a very critical point at the moment, where energy efficiency in green building was 10-15 years ago, and that makes the field so interesting at the moment.
Simon:Yeah, I think we have a lot more examples today than we would have had pre-pandemic, so there are a lot more buildings who have implemented a more healthy building approach at all sorts of different levels. The the risk is is that we're not capturing the hard data of that. So so we're in this period of time, a bit like with the early days of sustainability, where sustainable buildings were being built, but we don't have this catalogue of hard data and evidence to see what the outcomes were of those spaces. And that's part of a problem of our sector, particularly in the new building sector and this is one of the comments that sarah goodman made on the podcast is that engineers take the building to the point of it being handed over to the client and then, generally speaking, they run away as fast as humanly possible to have nothing to do with that space, for fear of being questioned about whether a particular room was thermally comfortable or not, or whether that door hinge ever worked or whatever. You know what it's like in construction. There's a never ending list of complaints why a space wasn't perfect, why a space wasn't perfect so that it's a space that operates with very few feedback loops of post-occupancy performance buildings, particularly at the human level, at the performance, satisfaction, comfort level, because it's been such a fraught space.
Simon:I think you speak to most engineers and consultants that they hate occupied buildings.
Simon:You know that they're quite happy making boxes that nobody moves into, but the moment you design a box that real people move into, you have to deal with people and their hard work, right so?
Simon:But I think that you know, think what you're saying suggests to me that one of the most valuable things we could do in this next, say, five-year period because if COVID hasn't woken everybody up which it hasn't, I think the general consensus is that that was a blip in recognition of the impacts of air quality on an environment we seem to have fallen back somewhere to where we were pre-pandemic not quite as bad, but I think people have been generally pretty disappointed with the impact it's had.
Simon:So in another five years, if we want people to be looking at this fundamentally different, it would be great if healthy buildings put as much effort into the post-occupancy analysis of those spaces as they did the pre-occupancy design and spec of those spaces. That would make an enormous difference and, to be fair, we're gonna you know we're gonna have a lot more building data than we probably did five years ago. You know, the proliferation of environmental sensors into spaces is accelerating pretty rapidly, um, so that I think we will be in a better space, but I I think it will be a mistake to stop short of just the building data. I think we should really try and capture as best we can the the performance side of it from a human perspective and the financial side of it where that can be measured, um, because that's the evidence base that will move the dial in five years time and it's it's a perfect point, because, yeah, it's.
Stefan:It's a little bit like if you would be a car manufacturer and you design a car and then you sell the car, but then you don't want to talk with your customers anymore because you think this is a perfect car. But maybe there might be something what you have now with cars, for example, where they have this touch sensitive button, so they have this touch screen, and, of course, for me as a car manufacturer, it's cheaper to build them and it looks all very fancy. But then you have, like this ongoing discussion among car like users saying like, yeah, but I like the, the touch buttons better, I have a better feeling, right. And that's the same with buildings. You build the buildings, but then you say, okay, it's yours, now you take care of that one.
Stefan:And I think that that is really a crucial point you're mentioning here, because it leads to the idea of having different building designs or trying out different things and then using post-occupancy over many years to see what is actually the one which is running home the value at the end. Right, yeah, because if this is what it is, that's the one I'm going to repeat. But this feedback loop needs to be there, and I think what you also already mentioned is it's the split incentive problem which needs to be solved, that it can be, or at least reduced, right, because if the same person who makes the decisions about investing in the building is the person who gets the benefits, it's much easier if I talk with a residential homeowner compared to somebody who's just renting the home a completely different understanding in that regard. So this is something which needs to be solved. But if the split incentive problem is less or not even there anymore, then having this, this willingness for post-occupancy um yeah, survey data, for example is much easier to do did you have a look in this study?
Simon:uh, much around the impacts regulations are likely to have, because a lot of what we've been talking about here is the carrot, the financial gain or benefits and so on. But racing up behind are increasing standards around indoor environmental quality. So that's got to have an impact at some level, hasn't it? In decision making? And certainly through the risk lens of the economics, like if people see this as being a regulatory risk, at some point that might change things Well, if you look at European Union level, you used to have the Corporate Sustainability Reporting Directive and the CSRD has.
Stefan:one of its main ideas is double materiality. So you invest in sustainability and its material. It has positive effect on the environment, but it also positively affects, in some regards, your business. Either it increases your revenues, it reduces your risk the idea of double materiality, right? That being said, the EU came now around with this whole new omnibus package which simplifies some of these regulations.
Stefan:I think if you would talk to industry representatives, they would say that, yes, there was a need to simplify these regulations Because at one point we were just overwhelmed by proving that the investments we do in sustainability are also given by that. But by simplifying it, I also feel it took a little bit the speed out of this pressure to invest into sustainability. But then again, the ones who believe in sustainability, they will do it anyways. They don't need the European Union to tell them they might even do it better if they don't have regulations, because they know their business very well. Right, it's the one who are interested in having a good business, who are struggling in a competitive environment, who have to think for every year they invest, what do I get out of that one? It's these people we have to take by the hand and show them. Basically, there is a value you can generate from that one.
Simon:Yeah, yeah, it's really interesting generate from that one. Yeah, yeah, it's really interesting. How did you, how did you, as an economist, find yourself looking at buildings and building health? Stefan, it was it pure chance, an accident? How did you find yourself here?
Stefan:maybe a mix of both in that regards. But the I did my master my, my first master here in master university in in the netherlands, and I did it in sustainable finance and I'm really a child of that master because the idea of this master is we want to invest into sustainability within the finance sector, but we want a return on of that one. We want this double materiality. This is where it comes from and there I also started to have this general interest for me in health science, because I like to I'm an economist by training, but I like to learn a little bit more about how the human body works and how we can maybe connect this understanding of human biology with some financial questions, understanding of human biology with some financial questions.
Stefan:And then it's by chance that this PhD position years ago popped up, which basically combines these two fields. So I was lucky in that regards that I was part of a real estate finance team and I was part of a human biology team, so I really could see the medical faculty side and the business side and could really combine this together, which also means, of course, I'm standing here today saying like we should do more interdisciplinary work, because this is exactly how I grew up. This is how my PhD was shaped right by trying to solve problems which were not solved yet, or trying to find answers to complex problems through the lens of interdisciplinarity, through the lens of combining different knowledge together. And for me personally, it combines my interest in finance and economics, but it also combines my interest in in human physiology, human health and understanding how the human body works yeah, yeah.
Simon:And that interdisciplinary side to this equation is fascinating, isn't it? When you start to pull in the economics, the, the building, physics and engineering, the chemistry, the human behavior, the health. Like this is a battle that requires multi-disciplines to win, like this. Otherwise we would have fixed it by now. The engineers would have convinced everybody that they needed to. We would. It was only conversation with somebody. We were saying we're trying to imagine what a building would look like if engineers wrote the rules. You know, like you know, or if economists wrote yeah yeah, exactly the cheapest material probably yeah, who knows?
Simon:yeah, that'd be really interesting, wouldn't it? There's probably some good cartoons. What would happen? What would a house look like if so-and-so invented it? Uh, might try it. Might stick that into one of the ai tools, get them to imagine different buildings. But it's true, isn't it? I mean, you need that rounded, holistic view, plus the fact, particularly in the real world, this stuff has got to make sense to people. It's got to be framed in a certain way and you know you're not an engineer isn't going to convince another engineer to invest in a building. An engineer has to convince a financier. Or you know, somebody in health has to talk to a scientist.
Stefan:You know we have to be able to talk across disciplines on this subject well, and it humbles you, right, at least it humbles me in terms of I just know what. I don't know, right, I have seen that health scientists and economists are basically talking about the same question, but one side is doing laboratory studies, the other side is doing observation studies. One side says we do a lab study, we change this one factor so we can talk about causality. The other side is saying, well, we use all these econometric statistical models, we can talk about causality, right, um, but in my case it, yeah, it. It really humbled me in terms of it is important to listen to the other side, especially for me being in a field dominated by engineering. There is so much more I need to learn from the engineering side. Right, but this communication needs to happen somehow.
Stefan:And, for example, joinen is. Again, he is a good example because, despite all the criticism of his statements from a scientific point of view because of course, we scientists, we always have to criticize each other, that's part of the game what he does very well is he's communicating these ideas of health food billing to a much broader audience, and that I find really interesting and really admirable. Because I can sit here as an, as an economist, as a scientist. I can do my studies, I can publish them very well. Who's gonna read that? Right? And he really showed us in a very nice way how, how important it is to to get people outside of academia academia on the same boat. And for that you need to yeah, you need to be able to speak different languages, and that comes from interdisciplinarity. Yeah, interesting.
Simon:And what did you do your phd in? What was the what? Was the quality actually it was an indoor air quality, yeah yeah.
Stefan:So I looked at indoor air quality and how it affects cognitive performance and I wanted to see how. I wanted to see what the physiological mechanism is, because there is some papers showing quite convincingly how bad ventilation or high levels of air pollutants is affecting the cognitive performance of humans. But then I wanted to understand what's the physiological mechanism behind that one, because if we understand what's going on in the human body from a biological point of view, we can discuss about resilience factors right as a question. For example, if we would know that people with some kind of pulmonary restrictions let it be asthma or allergies, right, have a lower resilience and have a much stronger negative effect on cognitive performance when they are exposed to the same air pollutant levels than somebody who is very fit, then we can also have a discussion about, on an individual basis, increase the resilience by making this person maybe be, in general, a healthier, a fitter person.
Simon:But for that we need to understand the mechanisms yeah, and so that that was kind of the focus of the work of the phd.
Stefan:Yeah, there was one focus, the the, to look at cognitive performance specifically, look at students and look at pupils.
Stefan:So there is, for example, there is one study which my supervisors did before where they had 28 or 27 primary schools here in the south of the Netherlands when they looked at ventilation rates and they wanted to see how does it affect the test scores, which it did right, so they really could make this very strong connection between badly ventilated room, bad air quality, lower test score. And then there was a subsample where we had sickness data and I use that, for example, because I asked myself what's the mechanism? Is the mechanism that a kid which is in a badly ventilated room is more often sick because of airborne infections and that's why it's missing classes and that's why it is worse at the test score? Or is it maybe that it's still the same amount of time in the classroom but but it can concentrate less well? Because understanding this mechanism helps me to generate an intervention, because one intervention is increasing the health by reducing sickness absence. The other one is saying that, okay, it is literally an immediate effect at the moment of bad air pollutants.
Simon:So there as well are the examples. I did, for example, and were you able to untangle.
Stefan:In that regards we could see that sickness, absence, is not necessarily driving this effect. So it seems to be that there is another mechanism which can explain why kids in a badly ventilated room have lower test scores than simply saying they are more often sick and that's why they just miss classes a lot.
Stefan:Yeah, interesting we did one, which is also interesting. We did one study in here at the university because then again we wanted to see if we have the evidence for primary school children about ventilation and test scores. Do we see the same in university students? And there we didn't see any effect on that one, and we assume this is purely because of the fact that as a student, even that you are in a badly ventilated classroom, you are there, maybe in our case, four hours a week and most of the learning time happens somewhere else.
Stefan:So this paper has more of this discussion going on in terms of where do you want to invest your capital the most if you want to improve indoor air quality with the aim of improving the performance of students? Maybe not in the, because you have limited capital, right. Maybe not in the lecture hall, where they sit only two hours, but maybe in learning spaces in the library, where they sit eight or nine hours, because this is where they do their learning, right, assuming you have limited capital. If you have unlimited, then of course your aim should be to improve it everywhere.
Simon:Yeah, it shows how complex it is. And you know we translate that to the conversation of the workplace in this new modern, hybrid working environment. You know, if people are spending a third, two thirds of their time not in the office anymore, it makes it even harder to draw straight lines between a particular improvement in a space and an impact on the business. You know like it's. Uh, when you get down to the brass tacks have been able to draw a slight, a straight line between a particular case and a particular outcome. There are so many confounding factors often that it's almost impossible to do. It's why it's almost, it's almost always at an epidemiological level.
Simon:This stuff seems to work. At the big numbers, population level, you can start to draw conclusions. But but even at a building level, you know, unless you've got the numbers of people in that space consistently enough to be able to draw solid statistical conclusions from an answer, is it there? Is it the the commute to work? Is it their home environment? Is it the office space? Is it the general mood and sentiment of the economy at the time? Is it, you know, like what is it that's driving the performance in that office space? It could be really hard to untangle.
Stefan:Because and that is again I come from this idea, also driven by my thermal physiology colleagues, that the human body is more resilient than you think. And I come from this idea of saying, yes, there are negative effects. They might increase with exposure time due to bad air quality, right, but I don't like this idea of saying the human body is very fragile and it cannot deal at all with adversity, when it comes to thermally uncomfortable, for example. Right, and of course there are and I might be now a little bit in danger because there are air pollutant contaminants where we don't need to discuss at all about the the negative effects of that one that even at the lowest level there is already a negative effect, right yeah, there's no good.
Simon:There's no good level of some pollutants. Yeah, for sure exactly, exactly that.
Stefan:that's for sure, that's undeniable but.
Stefan:I rather want to have a discussion about. Can we see that somebody who is generally very healthy and very fit is maybe more resilient to certain of these factors? Right? So what do we want? Do we want to have the building be very perfect, or do we maybe want to increase the resilience, the health resilience of the individual, which can translate into other buildings as well? Right, because if you make the building very good and then this person goes home when the home, the air quality is still bad, yeah, well then we still have this issue. But if we increase the resilience of that person against certain factors, then I don't need to care anymore in which building it is simply spoken, because I know it's a higher resilience level.
Simon:Yeah, and the challenge with air quality is there are certain toxicological impacts and certain pollutants that will cause harm, of course, but at some level. I mean, you know, let's take the microbiome, you know your exposure to bacteria and living organisms. I think most people accept that there is a negative impact of being in a sterile environment. So that means at some level there's a healthy level of microbiome, of bacteria and viruses and so on in the air, because if you don't have that you don't build up a resilience. So it's not a zero-sum game with some pollutants.
Simon:So I was just I was just recording one of the the one take podcasts there this week and it was about, um, the instances of childhood asthma depending on the exposure of the mother to air pollution and the. The evidence seemed to suggest with I think it was nitrogen dioxide, that exposure in one trimester to nitrogen dioxide increased the incidence of asthma in the cohort of children, but actually exposure of nitrogen dioxide in another trimester reduced it slightly, which said there might be something really complex going on about how you know that fetus is developing resilience to something because of exposure to a certain pollutant.
Stefan:So you know, I don't know.
Simon:I imagine it's really complex that they're you know, even though there are some pollutants that are carcinogenic or that you know you can say there's no safe level of exposure to. There may be some other pollutants where it's not quite as simple as that, you know, and it gets really complicated. But but here we're talking about long-term health and well-being and chronic effects of exposure, which is a a different conversation often than what we're talking about when we're trying to say the what's the financial benefit or what's the economic case for having a healthy building in the here and now, because, whether we like it or not, businesses working on annual reports and five-year business plans that they don't, they don't work in, or maybe pension funds, you could argue a kind of looking at a longer term, but we're not often looking at the same time frame as we would do chronic disease or something yeah, plus then again the split incentive problem of who bears the cost, right.
Stefan:I mean, it's undeniable that, as a business owner, if I have an office and my employees spend a majority of their lifetime in that office, I should have, or I have a duty to provide them with a healthy space.
Stefan:That's completely undeniable. But then again, is that happening in the real world? Ask health, occupational health managers right, they mostly only intervene, I guess, if it is becoming really bad. And this is where regulations come into place again. Right, because, as, because, as a policymaker, I will need to understand what is the cost that my people are in buildings with that indoor air quality? What is the cost on my healthcare system? Right, and then, instead of pumping the money into the healthcare system, I maybe have my subsidy to help my building owners to improve the indoor air quality and I solve the problem before it even starts to become a problem. Yeah, and that's a discussion which is often not not done in that regards, where we as researchers can contribute to that one by also having studies which do this prioritization, which talk about which of the changes is really the most contributing to my actual outcome, right.
Simon:So this paper that was published I was reading it there yesterday that's 10 questions on the economic impacts, effectively, of healthy buildings, isn't it? Is this work you're continuing to do? Is this research and work, is this a continuing focus for you?
Stefan:100. I mean the. The 10 question paper was for us basically the start, and for us in terms of it's me and it's 10 other authors, because of this idea of interdisciplinarity right, I knew that I cannot write it by myself, but I knew I can have a much better paper if I bring experts in different fields together. But for me that paper is the beginning, starting point. So now I know what is out there in terms of evidence, what still needs to be done, and from that I hope that I, but also other researchers, can now use that paper to build up their research.
Stefan:The second idea of the 10 question paper was also to give practitioners a good overview, and this 10 question is a really nice format because it's easy to read. In that regards you can skip the question you're not interested in. But I hope that also practitioners who want to understand a little bit more what is the healthy building, what can I do, what are the mechanisms behind it Can also use this paper to read over it and then let's see. I hope then in the next few years I can build up my scientific pipeline based on this paper and what I've learned from that.
Simon:So, from your perspective because I think it's been interesting A lot of the people that I've spoken to have generally looked at healthy buildings from just purely a health and well-being and health impact of certain air pollutants. Or're an IoT manufacturer, you're a healthy buildings label, you're an engineer or architect and so on. But I think this is the first time I've spoken to somebody from a purely academic perspective, that's looked at this in the round from an economic perspective perspective, that's looked at this in the round from an economic perspective, and I think it's a really interesting take on it, because you've looked at this through a lens of not necessarily trying to sell it but understand its value, and there's a distinct difference there. I think. You know, when we're selling an idea for people, we're telling a slightly different story than when we're trying to understand the value, and I think that's what's been interesting about this.
Stefan:I mean, I'm not sure if I can reach that ambition, but my ambition would be to go to the most conservative German asset manager you can find who has never heard about LEED or WELL or whatever, and he really doesn't care about it. But he's conservative in terms of a very good business owner, because it's a family business. He's running that business and his family for many, many years. He has this strong incentive of I need to run good as a business because I need to keep my people employed, right. This is a person I want to talk to. This is a person where I want to run good as a business because I need to keep my people employed, right. This is a person I want to talk to. This is a person where I want to show okay, listen, you need to invest into the indoor environment or healthy buildings because you are conservative and there is a certain risk or there's a certain value which you can generate in a safe way.
Stefan:That's, for me, interesting. I don't want to necessarily go to deloitte who has the amsterdam building, uh, the edge, because they did it already. They are fine. They also have the money for that one. Because it's the big companies, right? Yeah, the family offices, the mid-sized businesses, the ones who have so limited capital that they really have to be focused their investments. This is the interesting part, and I think these are the people we need to get right. And this is also the bigger impact in that regards, because most of our working population is not working for Deloitte and the other big four. It's working for the small, mid-sized companies.
Simon:It's a hard question to answer, I guess. But do we have the information today to be able to present the hard numbers to that conservative business owner and make a strong enough, purely objective business case for him to invest? And if we don't, what building blocks do we need to concentrate on to get there? Do you think from an economist conservative, you know, I think we can all picture the kind of business owner you're talking about. If we don't have it, what do we need to get there?
Stefan:yeah, that's a hard question. I think we are on the way to getting there, if and again, I think about the book from joe allen, which sells it very nicely and explains very nicely the the different aspects. I think about the very new paper from karina minkoff and franz. First about the, the rental revenue increase due to well-being. We are getting there, but we are not there yet. I think we are the very start and asking the question what's missing for him?
Simon:so. So you know you, like you say you can present the framing, I think, like the, the concepts there and perhaps even some case studies, but perhaps not his business type, you know. So he's he's trying to say like, okay, in my case I've got 150 employees, I'm in a 1995 business block with a warehouse we ain't moving for another 20 years like this is where we are. Um, we're in a process of consolidating costs and trying to manage increased fuel costs and uncertainty in the marketplace. You know I I need to understand the bottom line here about what this investment's gonna like. I think we couldn't. I think that's a fairly easy reach for a lot of people to picture that. The question is what are the building blocks for him? What kind?
Stefan:of evidence base is going to move the dial with someone like him, do you think? I think what it needs is and that's what I'm working on at the moment as a postdoc at EPFL in Switzerland they need a tool. They need some kind of tool where they can maybe plug in the numbers for their individual case and then they have an estimation of this is the return I would expect and, optimally, an estimation with a certain upper and lower boundary so that I can say, okay, in the worst case, like what Joellen said, in the worst case you still get a 1% return, in the best case you get a 5% return. Right, but they need an easy tool where they can plug in the numbers.
Stefan:And this is my ambition as a researcher, right? I want this tool to be based on very strong empirical studies, which I think is not there yet. There are a few papers, but not enough. So I hope that over the next few years I can maybe develop this tool, but I can continuously feed it with good, strong empirical studies so that I can go to this conservative business owner and can very convincingly say yes, I as a researcher, I looked at the underlying studies and I can say they are of the highest quality from a scientific point of view. So these estimations, they are very robust to different methods and I can really believe in them. It's not just pure estimations. I think that's important to happen and then I can convince a conservative owner to do these investments.
Simon:What creates those hard numbers? Is it enough evidence that, or a lack of evidence at the moment, that there was an improvement in rent costs or property value or like measurable impacts from a an asset value perspective, or is it better detail on the performance outcomes that you know? You plug this metric into your business. You get an uptick in performance of your people. Is it that side of the equation where we should be concentrating?
Stefan:I would say it depends with whom you talk, right, if you talk with an asset manager who's interested in the return of his portfolio, then and again I'm an economist I want to have empirical studies, I want to have observational studies where I can clearly see okay, you have a healthy building or you have a building with very good indoor air quality, it can generate higher rental return, it can generate a higher price. There is a property value, there is a positive effect on my portfolio performance. Then, from an asset management side of view, from an investor side of view, I don't maybe even care where it comes from, as long as I see it From a tenant point of view, if a tenant would ask should I rent that building there, I need then good empirical studies to show okay, this is the productivity increase you would expect, this is the decrease in sickness absence you would expect. And I think when we talk about, I think, the research about air quality and sickness, airborne infection and health, I think that is very strong evidence and I think that can be the first thing which we can very strongly lead to a business case. Because, if you think logically, if my people are more often sick, I pay them salary but they don't generate an output, right? Or I can go to the health insurance and can say well, I can invest into this new ventilation system, I decrease the sickness. Maybe the health insurance would even chip in some money, right, because then my people are less sick.
Stefan:I think productivity is still hard because it's so individual, based on the business case. But sickness absence and health and connecting that to air quality, I think there we are so far to make a very strong case and then translate that and then every business owner can calculate that. Basically, if I as a business owner know, in the worst case sickness absence goes down% sorry, in the best case sickness absence decreases by 10% when I have this ventilation system, in the worst case it's 2%. Still, I use this 2%, I use my average salary which I pay to my employees and I can see what can I save basically from that. Is that more than the investment I put into the ventilation? That would be a simple, a simple example and I think that could be convincing enough in that regards yeah, really interesting.
Simon:Stefan has been brilliant talking to you this afternoon. It was a fascinating conversation the first time we met and it's continued to be so. I think it's a real frontier of this field. Um, I think it's really interesting from its multidisciplinary aspect. You know we talk a lot about joining up engineering and health and social sciences and so on, but also the other direction we need to understand, like these are buildings. Buildings have value, they have people in them. We need to figure out how to frame this so that people can make decisions on it. So we'll put a link in the show notes for the 10 questions paper. It's really interesting. I think a lot of people will find it fascinating, um, and we'll put your contact details and so on through linkedin for people who want to keep in contact with you, because I'd say it's a an area, one to watch in, an area to keep an eye on. Thanks a million.
Stefan:Yeah, thank you. Thank you for having the time to present my work. Although I was very critical, I didn't give you the goal and answer here. I hope that maybe in a couple of years we can discuss again the actual goal and answer to all the questions we raised today.
Simon:Yeah, no, absolutely. You know both of us, I think, have spoken previously that this is just one element of it. You know there are a lot of co-benefits to improving buildings, particularly air quality, but on this particular point, it's one I know a lot of people struggle with. So the more information we have, the better it is for everybody. Stefan, thanks a million. Really appreciate your time. Thanks for listening.
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