Sustainability and Private Equity Real Estate Returns

Avis Devine (), Andrew Sanderford and Chongyu Wang
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Avis Devine: York University
Andrew Sanderford: University of Virginia
Chongyu Wang: University of Hong Kong

The Journal of Real Estate Finance and Economics, 2024, vol. 68, issue 2, No 1, 187 pages

Abstract: Abstract This paper explores private equity real estate fund performance and voluntary environmental, social, and governance (ESG) disclosures. Using data from the National Council of Real Estate Investment Fiduciaries (NCREIF), it examines the relationship between performance for funds in the Open Ended Diversified Core Equity (ODCE) Index and reporting to the Global Real Estate Sustainability Benchmark (GRESB), a platform for disclosure about fund/firm-level ESG strategies and performance. The empirical analyses suggest four conclusions. First, there has been substantial adoption of and reporting to GRESB in the last 5 years, suggesting that reporting to GRESB is a form of table stakes for ODCE members. Second, GRESB participation and performance are both significant predictors of cross-sectional fund returns. Third, GRESB participation and performance are associated with the price appreciation component of fund total returns but not with the income component. Fourth, the relationships between fund returns and GRESB participation and scores are independent of local economic conditions. These results close an important gap in the literature about private equity real estate fund performance and ESG/climate change mitigation efforts in commercial real estate markets.

Keywords: Private equity; Real estate; ESG; Sustainability; GRESB; Benchmarking (search for similar items in EconPapers)
JEL-codes: G31 G32 O30 Q55 Q56 R33 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11146-022-09914-z

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