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Greenness and financial performance of European REITs

Greenness and financial performance of European REITs The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs).Design/methodology/approachUsing a sample of 50 listed European REITs, the analysis leverages on Ordinary least squares models to investigate the relationship between greenness and operating performance indicators. In particular, it examines three types of greenness indicators: the overall Green Real Estate Sustainability Benchmark (GRESB) rating, its two components (management and policy [MP] and implementation and measurement) and the seven aspect scores; return on equity (ROE) and return on assets (ROA) are the fundamental measures of REITs operating performance.FindingsThe results demonstrate a positive relationship between greenness indicators and operating performance in European REITs, but the impact on ROE and ROA differs depending on the GRESB variable analyzed. If the GRESB rating proved to be significant on ROE and ROA, none of its two components has an impact on ROA, and only the MP score has a positive relationship with ROE. Finally, of the seven aspect scores, only the stakeholder engagement is significant on the two dependent variables.Originality/valueThe commercial real estate sector has a significant role in tackling climate change issues. To incentivize the market to increase the investments in green buildings, it is essential to find a link between their sustainability characteristics and the improvements they deliver in terms of operating performance. Despite there being a substantial body of literature investigating this connection in the US REITs market, there is still limited knowledge on the relationship between green and operating indicators in the European REITs market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

Greenness and financial performance of European REITs

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-9269
DOI
10.1108/jerer-05-2020-0030
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs).Design/methodology/approachUsing a sample of 50 listed European REITs, the analysis leverages on Ordinary least squares models to investigate the relationship between greenness and operating performance indicators. In particular, it examines three types of greenness indicators: the overall Green Real Estate Sustainability Benchmark (GRESB) rating, its two components (management and policy [MP] and implementation and measurement) and the seven aspect scores; return on equity (ROE) and return on assets (ROA) are the fundamental measures of REITs operating performance.FindingsThe results demonstrate a positive relationship between greenness indicators and operating performance in European REITs, but the impact on ROE and ROA differs depending on the GRESB variable analyzed. If the GRESB rating proved to be significant on ROE and ROA, none of its two components has an impact on ROA, and only the MP score has a positive relationship with ROE. Finally, of the seven aspect scores, only the stakeholder engagement is significant on the two dependent variables.Originality/valueThe commercial real estate sector has a significant role in tackling climate change issues. To incentivize the market to increase the investments in green buildings, it is essential to find a link between their sustainability characteristics and the improvements they deliver in terms of operating performance. Despite there being a substantial body of literature investigating this connection in the US REITs market, there is still limited knowledge on the relationship between green and operating indicators in the European REITs market.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: Jun 4, 2021

Keywords: Operating performance; European REITs; Greenness indicator; GRESB rating

References