Green investments, green returns: exploring the link between ESG factors and financial performance in real estate

Giacomo Morri, Fan Yang and Federico Colantoni

Journal of Property Investment & Finance, 2024, vol. 42, issue 5, 435-452

Abstract: Purpose - The aim of this research paper is to analyze the connection between ESG performance and financial performance within the real estate sector. By focusing on ESG ratings and pillar scores as proxies for ESG performance, the study investigates how these factors impact both profitability and market indicators. Design/methodology/approach - With data sourced from over 680 publicly listed real estate companies, the research employs a fixed effects regression model to analyze the findings. By utilizing this method, the study can assess the impact of governance, environmental and social factors on both the accounting and market performance of real estate companies. Findings - The outcomes of this study underscore a link between sustainability, particularly environmental aspects and financial performance. However, the study also reveals a contrasting result: governance factors are associated with adverse financial outcomes. Nevertheless, it is important to highlight the limitations as the results present a mixed picture with limited significant findings. Practical implications - Companies should prioritize improvements in environment to boost profitability, while they should carefully consider the costs and benefits associated with enhancing their governance structure. Originality/value - By focusing on this industry and adopting a global perspective, the study addresses a gap in the literature. The research’s innovative approach to utilizing ESG ratings and pillar scores as proxies for ESG performance enhances its originality. Furthermore, the research’s identification of the differing impacts of environmental and governance factors on financial outcomes add novel perspectives to the discourse.

Keywords: ESG; Real estate; CSR; Financial performance; Sustainability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-09-2023-0084

DOI: 10.1108/JPIF-09-2023-0084

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