Decoding ESG Impact: How Advanced Sentiment Analysis Reveals ESG-related Textual Impact on REIT Returns

Sophia Bodensteiner, Lukas Lautenschlaeger, Wolfgang Schäfers and Andrew Mueller

ERES from European Real Estate Society (ERES)

Abstract: The integration of Environmental, Social, and Governance (ESG) factors in Real Estate Investment Trust (REIT) analysis is increasingly recognized as a key element in sustainable investing. It can create long-term value, improve reputation, and help REITs to remain competitive and resilient in the market. This study investigates the influence of ESG-related sentiment on the constituents of the NAREIT Index, addressing the growing need to understand its impact on the public opinion and the real estate market performance. Our analysis examines 10-K reports with an additional focus on ESG-related segments and separate ESG reports of real estate companies in the NAREIT All Equity Index in the period 2016-2023. The sentiment analysis is carried out using a Large Language Model (LLM) and aggregated using different sentiment measures. Finally, an OLS regression is applied to analyze the impact of these sentiment indices on the returns of the companies. Preliminary results indicate a correlation between ESG-related sentiment in the company reports and their price returns. This indicates the recognition of ESG as an investment driver for institutional investors.

Keywords: Corporate Disclosure; Esg; REITs; Sentiment (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-big and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2025_151

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