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Green Buildings Are Better – Financial Performance


A study by the Department of Energy found that in green buildings net operating income was 28.8% higher than in non-green buildings. Missouri has more green buildings than Tennessee, but far fewer than Maryland.


The residential and commercial buildings in the U.S. consume about 40% of the nation’s total energy consumption. Green buildings use less energy, improve occupant health and productivity, and lower ownership risk. However, until recently researchers have lacked sufficient historical data to analyze the link between energy efficiency and financial performance because the information has been proprietary.

A recent study by the U.S. Department of Energy addressed this question. The authors were able to identify a set of 131 buildings for which the necessary data were available. Only buildings that met the following criteria were accepted into the study:

  • Market value per square foot was greater than $400.
  • Rent concessions in the building were greater than $0, but less than $3 per square foot.
  • Monthly rent in the building was greater than $6 per square foot.
  • Occupancy in the building was greater than 50%.

The authors then divided the buildings into two groups: buildings were “green” if they had an Energy Star score of 75 or higher (a measure of energy efficiency compared to other buildings of the same type) or if they had achieved LEED Certification. A discussion of what these criteria mean is below. Buildings were “non-green” if they did not meet either criteria. The result was 2 groups of buildings, green and non-green, each with more than 60 buildings in it.

The authors then compared the buildings on the following metrics:

  • Market value per square foot;
  • Net operating Income per square foot;
  • Operating expenses per square foot;
  • Rental income per square foot;
  • Rental concessions per square foot;
  • Occupancy rate.

Table 1. Comparison of Green and Non-Green Buildings on 6 Financial Performance Metrics. Source: Department of Energy, 2017.

Table 1 gives the results. Green buildings had higher market value, higher net operating income, higher rent, lower rental concessions, lower operating expenses, and higher occupancy rates. The differences in operating expenses and net operating income achieved statistical significance (p = 0.0089 and 0.0015 respectively), and the difference in market value approached it (p = 0.094).

Looking at Table 1, what jumps out is that net operating income was 28.8% higher in green buildings. Most of the increase seems to have come from reduced expenses, with a smaller contribution coming from increased rents.

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Table 2. Source: Miller et al, 2008.

The Department of Energy study is not the only study to suggest better financial performance from green buildings. Table 2 summarizes results from 3 additional studies, all of which found that LEED and ENERGY STAR buildings generated higher rents, higher occupancy rates, and higher value per square foot.

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Figure 1. Data source: Green Building Information Gateway

So how many green buildings are there in Missouri? A database operated by the U.S. Green Building Council lists 389 LEED certifications in Missouri, covering 35.27 million square feet. Tennessee, Missouri, and Maryland are the 17th, 18th, and 19th most populous states in the country. Tennessee has 377 LEED certified activities (48.35 million square feet), and Maryland has 964 (11.4 million square feet). Figure 1 shows the data, with the number of LEED certified buildings in blue and the LEED certified square footage in red. Clearly, green building has caught on in Maryland to a much greater extent than it has here. It’s too bad – if you could deliver health benefits to those who live and work in a building, while at the same time improving its net operating income by 28.8%, you’d think that you’d want to do that, wouldn’t you?

Explanation of Energy Star and LEED Certification: ENERGY STAR is a building energy benchmarking program operated by the U.S. Department of Energy. Building owners enter their building’s energy consumption (from utility bills and similar sources) into a computer database. The database then compares the building’s energy consumption to that of other similar buildings. In other words, hospitals are compared to hospitals, schools to schools, office buildings to office buildings, etc. The program then gives each building a rating from 1-100, the higher the number the better the building’s energy performance. LEED is an acronym that stands for Leadership in Energy and Environmental Design. To achieve LEED certification, a building must incorporate a suite of technologies that improve the building’s environmental performance in a number of areas, from energy consumption to indoor air quality to water consumption, and others. The LEED system is administered by the U.S. Green Building Council.

MoGreenStats is now going on break for a few weeks. The next post will be scheduled for August 24, 2017. Happy trails ’til then.

Sources:

Department of Energy. 2017. Utilizing Commercial Real Estate Owner and Investor Data to Analyze the Financial Performance of Energy Efficient, High Performance Office Buildings. Downloaded 7/9/2017 from https://energy.gov/sites/prod/files/2017/05/f34/bto_PilotResearchStudy-DOEFinancialDataInitiative_5-8-17.pdf.

Miller, Norm, Jay Spivey, and Andy Florance. 2008. Does Green Pay Off? Published by U.S. Department of Energy. Downloaded 7/10/2017 from https://www.energystar.gov/sites/default/files/buildings/tools/DoesGreenPayOff.pdf.

The Green Building Information Gateway, an online database operated by the U.S. Green Building Council. Data accessed online 7/9/2017 at http://www.gbig.org.

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Missouri Burden of Disease

In the last two posts I looked at a report that attempted to quantify the burden of disease attributable to environmental factors. It was produced by the World Health Organization (WHO), and its analysis concerned the whole earth.

The Missouri Department of Health and Senior Services produced a report on the burden of chronic diseases in Missouri in 2013. The report makes interesting reading, though it is not equivalent to the WHO report.

Figure 1. Source: Yun et al, 2013.

Of the top 8 causes of death in Missouri during 2010, 7 were chronic diseases. (Figure 1) Together, they caused 68.2% of all deaths in Missouri. Heart disease and cancer caused by far the most, between them accounting for almost half of all deaths.

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Figure 2. Source: Yun et al, 2013.

If one defines premature death as death occurring before age 65, then 14,827 Missourian’s died prematurely in 2010. As shown in Figure 2, chronic diseases caused 58.4% of the deaths, cancer and heart disease again leading the way, causing 46% of all premature deaths.

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Figure 3. Source: Yun et al, 2013.

Almost 3 in 4 Missourians (74.4%) were affected by at least one of 13 major chronic conditions, as shown in Figure 3 (individuals may be affected by more than one condition, thus the percentages do not sum to 100%). More than 1/3 of Missourians were living with cholesterol and hypertension, conditions which are not fatal in themselves, but which contribute to many other diseases that are. The prevalence of each of these conditions was higher in Missouri than nationally, except for vision impairment, which occurred in Missouri about at the same rate that it does nationally.

The mortality rates for heart disease, cancer, stroke, and diabetes all declined significantly in Missouri between 2000 and 2009. Prevalence rates did not, however, and for some chronic diseases prevalence rates actually increased. Thus, it seems that Missouri has made progress managing chronic diseases, but not preventing them.

The Missouri report did not address environmental factors that cause disease. To the extent that the report did consider risk factors, it focused on demographic characteristics, personal habits, and the social environment, such as the availability of health care, the availability of healthy food, and second-hand smoke. While some of these overlap with the WHO report to a limited degree, the Missouri report did not consider ecological factors such as air pollution and exposure to toxic chemicals. Despite the fact that ecological factors contribute strongly and obviously to several of the chronic conditions from which Missourians suffer, such as cancer and chronic lower respiratory disease, I could find no report addressing the issue in Missouri. If any of you know of one, please let me know.

Sources:

Yun S, Kayani N, Homan S, Li J, Pashi A, McBride D, Wilson J. 2013. The Burden of Chronic Diseases in Missouri: Progress and Challenges. Jefferson City, MO: Missouri Department of Health and Senior Services. Downloaded 5/2/2017 from http://health.mo.gov/atoz/pdf/burdenofchronicdiseasesinmissouri.pdf.

Death and Disease from the Environment


In 2012…12.6 million deaths globally, representing 23%…of all deaths, were attributable to the environment. When accounting for both death and disability, the fraction of the global burden of disease due to the environment is 22%… In children under five years, up to 26%…of all deaths could be prevented, if environmental risks were removed.


So begins the Executive Summary of Preventing Disease Through Health Environments: A Global Assessment of the Burden of Disease from Environmental Risks, a report issued by the World Health Organization (WHO). Those of us who think of the environment as the necessary support of all life on Earth may not find their claim surprising, but it is pretty dramatic: more than 1 death in every 5. Let’s look at what it means. This post will discuss some preliminaries and look at broad conceptual findings. The next post will look at specific disease burdens.

The authors looked at 133 types of diseases or injuries and found that 101 of them had significant links with the environment. They were able to quantify, at least partially, the environmental contribution for 92 of them. The 92 conditions run the gamut, including:

  • infectious diseases, such as malaria and diarrhreal diseases;
  • neonatal and nutritional conditions, like malnutrition and birth defects;
  • non-communicable diseases, like cancer or neurological disorders;
  • unintentional injuries, such as road traffic accidents or unintentional poisonings;
  • intentional injuries, such as self-harm or interpersonal violence; and
  • risk factors that contribute to non-communicable diseases of other types, but which are related to the environment, such as obesity and physical inactivity.

Figure 1. Source: Prüss-Ustün et al, 2016.

Some of these may seem controversial to an American public, seeming like personal choices. The authors contend, however, that each of them contributes to death or disease, and each of them has an identifiable link to environmental factors that are modifiable by people.

As one might expect, the fraction of deaths attributable to the environment is higher in poorer countries, lower in wealthy countries (Figure 1). There are several reasons for this. One is that wealthier nations are able to afford better environmental protections. Another is that wealthier nations have been able to transition to safer methods of doing almost everything (from transportation, to industrial processes, to cooking and home heating).

Figure 2. Percent Attributable to Environmental Causes, by Disease Type and Region. Source: Prüss-Ustün et al, 2016.

The type of disease impacted by the environment also varies by region (Figure 2). In Sub-Saharan Africa environmental factors cause a high number of per capita deaths from infectious, parasitic, neonatal, and nutritional diseases. Examples might include malaria, diarrheal diseases, and malnutrition. But in Europe, Southeast Asia, the Western Pacific, and High-Income OECD Nations, environmental factors cause high numbers of per capita deaths from non-communicable diseases. Examples might include cancer and heart disease.

Some background information may help in understanding the report’s findings. It is rare for the environment to sicken or kill somebody outright. Typically, the environment leads to some other condition that is the direct cause of illness or death. For instance, desertification may lead to famine, but starvation may be listed as the direct cause of death, not desertification. A contaminated water supply may lead to cholera, but cholera may be listed as the direct cause of death, not contaminated water. Asbestos may led to mesothelioma, but mesothelioma may be listed as the direct cause of death, not asbestos.

Figure 3. Conditions Environmentally Caused: Included and Excluded. Source: Prüss-Ustün et al, 2016.

The WHO report defines environmental risks broadly. Figure 3 shows what is included and what is excluded. Diseases that involve person-to-person interaction, or that result from personal habits and choices are excluded. Also excluded are disease vectors that exist in the environment, but which can’t readily be modified (for instance, pollen). Included are factors that most people would regard as environmentally modifiable (e.g. exposure to chemicals or air pollution). Thus, mesothelioma caused by asbestos exposure would be included, but getting the flu from somebody at work would not be.

Nobody keeps records of environmental exposure leading to death, especially in the undeveloped world. Thus, it has to be estimated. The report used several types of estimates which require the use of assumptions and/or expert opinion. Thus, be sure to keep in mind that the report represents an estimate. It is almost certain to contain errors, though it may be the best estimate available.

The next post will look at specific disease conditions, and what fraction of the disease burden can be attributed to environmental factors.

Sources:

Prüss-Ustün, A., J. Wolf, C. Corvalán, R. Box, and M. Neira. 2016. Preventing Disease Through Health Environments: A Global Assessment of the Burden of Disease from Environmental Risks. WHO Press: Geneva. Downloaded 5/3/2017 online from http://www.who.int/quantifying_ehimpacts/publications/preventing-disease/en.