Is this the reason for the mold smell?

[Vemsomhelst2]

Yes, if it can't dry out, and/or if it also adds moisture from underneath through the slab.
Wood dries towards the surrounding air. Under the sill is the concrete slab. There, the sill can't dry out. If there is also insulation between the sill and the slab, it acts like a sponge. Old asfaboard can also act like a sponge if it gets wet regularly and doesn't have time to dry between. The absence of an air gap against the panel, as well as directions where little or no warming sun reaches, makes it take longer to dry.

Judging by the picture, the sill and battens look dark at the bottom. This is exactly how it looks from long-term dampening (=> moisture damage). In other words, this isn't caused by a 100-year rain but by constant too much moisture over many years. When moisture damage, and thereby also mold, is established, the mold grows immediately once it gets a little water. If it's also warm (summer), it grows rapidly.

Thanks. What do you think the solution is? To rebuild the facade with a proper air gap?

 

[Oldboy]

The most pressing problem is probably the mold smell, right?
That could become troublesome. That is, if mold is not only on the sill but also under the floor. In that case, the floor needs to be torn up and the slab cleaned.
The sill probably also needs to be cleaned from mold. Then it needs to be lifted and a moisture barrier installed under the sill.
The facade seems to need an air gap, whose most important task in this case is to prevent rainwater from reaching the asfaboard, sill, and concrete slab.

If the sill is sufficiently hard, that is, not too rotten, it can be kept, but it must be able to dry out. It can only dry upwards and outwards, so it takes a little time, but if it doesn't get wet again, it should work. (The sill paper and the air gap ensure that moisture does not reach the sill.)

An uninsulated slab on the ground is a risk construction, but if mold and moisture are caused by penetrating rainwater (and not ground moisture through the slab), then there are conditions to get it in order.

 

[Vemsomhelst2]

The most urgent problem is probably the mold smell?
That can become troublesome. That is if mold is present not only on the sill but also under the floor. Then the floor needs to be ripped up and the slab cleaned.
The sill likely also needs to be cleaned from mold. Then lifted and a moisture barrier placed under the sill.
The facade seems to need an air gap, whose main task in this case is to prevent rainwater from reaching the asfaboard, sill, and concrete slab.

If the sill is sufficiently hard, that is not too rotten, it can be retained, but it must be able to dry out. It can only dry upwards and outwards so it takes some time, but if it does not get wet again, it should work. (The sill paper and air gap ensure that moisture does not reach the sill.)

An uninsulated slab on ground is a risk construction, but if the mold and moisture are caused by penetrating rainwater, (and not ground moisture through the slab), then there are conditions to get it sorted.

I am uncertain about exactly where the mold is located. The sill is a bit dark at the bottom but doesn’t seem soft. The slab and the structure in the facade appear to be free from mold. I’ve found some mold in the air gap in the ceiling where there was a previous water leak.

Is there any chance that the mold smell will disappear if you ensure it can dry out properly, or will the mold continue to smell even if it is not actively growing?

 

[Oldboy]

If the mold dries out and becomes inactive, the mold smell will disappear. Presumably in a few weeks.