How Healthier Buildings Manage Risk
We spend most of our time in very unhealthy spaces.
As concepts like “green” and “green buildings” appropriately expand to include aspects specifically focused on human health and wellness, these changing terms naturally intersect with both risks and opportunities.
As a lawyer and sustainability consultant, I apply a legal and risk management lens to these issues. And given the current state of the market, and based on my review of the available research, I can say with confidence:
Healthier buildings are a risk management strategy; unhealthy buildings are a liability. And almost every building is unhealthy in one way or another.
In this article, I break down what this means, and provide strategies that practitioners can leverage to advocate for healthier buildings as the risk management tools they really are.
Healthier buildings — what are we even talking about?
First, notice that I try to use the term “healthier.” What I’m really doing is managing my own risk — because I think it is extremely difficult to claim that any building is completely “healthy.”
As an example, buildings are designed to bring people together — to live, learn and work. But as the pandemic has taught us, bringing people together can be very, very unhealthy. Like many things, it all depends on context.
Additionally, using terms like “healthy” can be problematic, because while there are certain ranges of human experience that encompass health, health is also a very personal concept.
What is “healthy” to me, may not be healthy to you, for a variety of reasons ranging from genetics to geography.
There are ways that we can make buildings “healthier,” but can we ever really make a building completely “healthy?” Probably not.
Even I sometimes slip and use the phrase “healthy building.” It’s one syllable shorter and it makes more sense to a wider audience, but when I’m trying to make a point, I try to be mindful of my language and use “healthier.”
One additional point with respect to language: while these terms are still evolving, when practitioners like myself talk about healthier buildings or healthier building strategies, we are really talking about two aspects of “health:”
- Human Health — direct health benefits to the building occupants. There are a range of health benefits that flow from healthier building strategies such as increased natural daylighting, improved air quality and incorporation of biophilic design elements.
- Environmental Health — indirect, environmental benefits that support human health. We know that climate change creates severe and disproportionate health impacts. Because a livable climate is a shared resource, any strategy that mitigates climate change also supports human health.
With that background, how do healthier buildings manage risk and why are unhealthy buildings a liability? At least two reasons: first, the pandemic created very educated real estate consumers; and second, our buildings and occupants face new and evolving risks that new tools like healthier buildings, can manage.
The pandemic created a highly educated consumer base
The pandemic forced the general population—many for the first time — to consider how indoor spaces, and specifically indoor air quality, impacts their health.
This information was deeply embedded into popular culture. For example, businesses, including restaurants, started to advertise “clean” air.¹
This educated consumer base arguably drove a very high demand for healthier buildings. For example, the International WELL Building Institute (IWBI), the entity that administers the WELL Building Standard (WELL), reported in early 2021 that, “WELL projects have now crossed the 1.5 billion square foot mark across more than 80 countries.” This is incredible growth for a program that was launched in 2014.
The flip side of this growth is that there is real risk in missing out on the benefits of capturing this market demand for healthier buildings. There is also the risk of obsolescence as projects that fail to implement basic healthier building strategies will be left behind.
In an interview with David Levinson, the CEO of L&L Holding, developer of 425 Park Avenue — the first new office building on Park Avenue in 50 years and the first WELL-certified commercial office building in Manhattan — summarized the potential for missed opportunities:
“Levinson is not just thinking about what his tenants will want this year or next. He is thinking about the tenants 5, 10, and 20 years from now. His major concern is that if he doesn’t take these steps toward health now, his building will be outdated in a few short years, surpassed by the next ‘latest and greatest’ in building. In some ways, it’s a risk-management decision. He is future-proofing his building.”
As Levinson further explained, “In an up market, I get the premium. In a down market, I get the tenant.”²
Risk just isn’t what it used to be
Related to future-proofing and risk management is the fact that risks are changing — they just aren’t what they used to be.
We have historically defined risk as a resulting “bad” outcome: a lawsuit, increased costs, damages, injuries, insurance claims, delays, negative press, etc. But we tend to under value — and at times completely ignore — the risks associated with a rapidly changing climate.
And this is a huge mistake.
The “new” risks that climate change presents to buildings and the humans that inhabit them are of a scope and scale that our brains don’t like to comprehend. This largely unprecedented scale means that the tools we have traditionally used to manage risk — like insurance — no longer fit the current context.
As an example, in response to the 2019 and 2020 wildfire seasons, the Insurance Commissioners in Western states like California had to step in a declare a moratorium on non-renewals of policies in certain fire-prone areas. Wildfires in these states have increased in frequency and severity to the point that insurance companies can no longer profitably manage the risk for their insured homeowners. The insurance industry’s response? Pull out of these markets, to the point where regulators have to step in.
We can flip this response to instead try to identify opportunities. We know that a changing climate puts all assets (insured or not) at greater risk of loss or damage. What this means is that any strategy that slows climate change (or supports climate predictability) should be considered a risk management strategy. Because it is.
This includes basic healthier building strategies like reducing reliance on fossil fuels by improving building energy performance and converting to clean energy. It also includes healthier building strategies aimed at supporting occupant health, such as controlling indoor pollution sources, because the reality is, we already spend 90% of our time indoors; this percentage will increase as we seek refuge from our rapidly changing climate.
Healthy building certifications are a key part of the conversation
One of the most important things I learned from practicing construction and insurance coverage law is that at the core of most lawsuits is an unmet or misaligned expectation. One party delivered one thing and the other party expected something else.
It’s both that simple and that complicated.
I can boil a 13-year legal career down to one key lesson: managing expectations is a critical risk management strategy. We do this all the time; through conversations, contracts, confirming emails, meetings and even design charrettes. But in this time of evolving risks, we can and likely should do better.
One often-overlooked aspect of managing expectations is utilizing precise language.
Sustainability is actually a very broad discipline and we are rich with both acronyms and specialized terms. And while we have, to some degree, developed a common language, there is lots of room for ambiguity and the resulting increased risk of misaligned expectations.
For example, if I asked 10 people to define a “green” building, I would very likely get 10 different answers, and at least one person would say it was a building that was literally painted green. There’s one in every bunch.
That said, over the past 20 years or so of “green” building, the industry has developed a sort of common language around “green,” largely driven by third party certification programs like LEED (Leadership in Energy and Environmental Design). LEED created an external standard that practitioners could point to, which helped manage stakeholder expectations by creating consistency in the market.
As the definition of “green building” has expanded to include concepts of heath and wellness, as well as resilience (among others), the industry has developed specialized certification programs that focus on human health and wellness, such as WELL, Fitwel and others.³
An external standard that is respected in the market helps manage expectations while also honoring the fact that these terms change over time. Certification programs naturally and appropriately evolve as technology advances, new research is published and the various support industries develop their skills and gain experience. This is demonstrated by the fact that LEED is now on version 4.1 and WELL v2 was launched in 2020.
Third party certification programs focused on health and wellness are creating a common language around ambiguous terms like “healthy buildings,” which helps manage the risks associated with unmet or misaligned expectations. For example, if you agreed to develop, construct or operate a “healthy building,” what, exactly, is that?
Widespread adoption of ESG will make unhealthy buildings obsolete
One more point about risk: there is real risk in missing market opportunities. Disclosure drives competition, and while I cannot predict the future, I can say with high confidence that disclosure and evaluation/assessment of Environmental, Social and Governance (ESG) indicators will become increasingly regulated and the accepted business standard, as companies like Salesforce continue to take strong leadership roles.
The climate risk assessments of real estate porfolios will be a key part of ESG disclosures and healthier, more resilient buildings, which manage a variety of risks while also doing better in the market, will rise to the top.
This market shift also underscores the importance of a common language, as discussed above and noted in the recent report, A New Investor Consensus: The Rising Demand for Healthy Buildings:
“Third-party healthy building certifications will increasingly be relied upon to offer a viable framework for consistently tracking and integrating health-related ESG metrics.”³
This report is widely cited as of one of the largest surveys of commercial real estate investors, with over $5.75 trillion in assets under management. Healthier buildings are clearly here to stay.
Healthier buildings manage a variety of risks
We need to start leveraging healthier spaces as the risk management tools they really are. To effectively do so, it is important to be clear about terms like “healthy,” meet consumers’ expectations for these spaces, capture market opportunities, leverage certification programs to create a common language, and consider the natural evolution of risks.
In later articles, I’ll outline and prioritize specific healthier building strategies, including the features of the leading certification programs, and explain how they manage a variety of risks.
[1] Demonstrative of consumer demand, an Alexa skill was developed where users could request outdoor air quality information for their area.
[2] Both quotes from Allen and Macomber, Healthy Buildings: how indoor spaces drive performance and productivity, Harvard University Press (2020), p. 165–168.
[3] Report available for download at this link: https://www.fitwel.org/new-investor-consensus/
