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Can profitable also be sustainable?

Two years ago, we published a blog post which discussed whether a demand controlled indoor climate is a profitable investment. I was recently asked to return and, with a couple of years' perspective, comment on whether the topic is still relevant or if any changes have occurred that affect the course of the blog.

If the pen was in my hand today, the blog would be rephrased, and the headline would shift from rhetorically pondering whether demand controlled indoor climate is a profitable investment, to ask if it is a sustainable investment. Let's work it through.

Many real estate companies, just like numerous other organisations and entities, face the challenge of adapting their business models to contribute to a more sustainable future and to help achieve the United Nations' (UN’s) global sustainability goals. Common recurring goals on real estate companies' sustainability agendas therefore include reduced energy consumption in buildings, lowered climate impact in new construction and renovations, and, in the not-so-distant future, reported net-zero carbon emissions. It is important to emphasise that for economic sustainability, or profitability, it is incredibly vital for tenants to stay long term, and they will if they are satisfied. In addition, several real estate companies aim to increase the proportion of certified properties, partly driven by the opportunity to obtain green financing but also to gain a competitive edge.

Energy consumption, indoor climate and sustainability goals
Back to the sustainability goals. Some of UN's global sustainable development goals under Agenda 2030 are particularly relevant in the context of real estate expansions and management. The opportunities to contribute to the following goals are substantial:

• Goal 3: Good health and well-being
• Goal 11: Sustainable cities and communities
• Goal 12: Responsible consumption and production
• Goal 13: Climate action

So, to address the new question above – is it sustainable to invest in demand controlled indoor climate? Can the choice of indoor climate solution contribute to the transition to more sustainable development? Could such an investment even be financed with green funding?

To answer that, a few things should be clarified. In the Western world, buildings account for about 40% of the energy consumption, and the energy used for ventilation, heating, and cooling constitutes a significant 15%. When a real estate company engage in activities for increased energy efficiency, ventilation is often an area where the greatest energy savings are found. This because older buildings tend to be excessively ventilated, and because there is a lack of means to ventilate, heat, or cool according to the actual need inside a building. Simply put, demand controlled ventilation is missing.

Another fundamental aspect to be aware of when answering the new framing of the question, is that people in the Western world spend nearly 90% of their time indoors. To feel good and be comfortable in the indoor environment ought to be crucial to achieve the third UN goal mentioned above.

At Katedralskolan in Linköping, Sweden, the energy savings amount to an astonishing 70% after a renovation project. The change to new air handling units, with high efficiency heat recovery, and the investment in an energy-efficient demand controlled indoor climate system made this incredible difference in energy consumption. At the same time, staff and students expressed vast improvements in the indoor climate, there are today far more satisfied with the indoor environment.

So, it is possible to significantly reduce the energy consumption without compromising indoor climate, thus ensuring satisfied tenants. All of this clearly relates to all the UN sustainability goals mentioned above.

From profitable to sustainable
A property can be certified in accordance with various building certifications in order to verify how sustainable the property really is. Indoor climate and energy performance are central components of most certification programs, and when a building is provided with a demand controlled indoor climate system, an excellent foundation is created for both certification and high ratings thereof. Furthermore, a property with a good energy class and which is built to a sufficient level of environmental certification has a good chance to obtain green financing. Even renovations, which may not meet the initial criteria for a good energy class and high environmental certification, can qualify for green financing if the estimated annual energy efficiency meets certain requirements. As shown above, a demand controlled indoor climate can lead to significant energy savings and can therefore be an action which is likely to qualify as a green investment.

With the arguments above, I would like to assert that the previous blog, focusing on profitability of an economic investment, is relevant, but I believe it's more than that. Investing in demand controlled indoor climate is sustainable as it can generate a significant reduction in energy consumption and provide positive health effects thanks to a good indoor climate – two factors strongly linked to economic sustainability.

Learn more about demand controlled indoor climate here, and here is the initial blog post from a few years ago.