IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i4p2037-d499054.html
   My bibliography  Save this article

Pricing ESG Equity Ratings and Underlying Data in Listed Real Estate Securities

Author

Listed:
  • Dirk Brounen

    (Department of Economics, Tilburg University, 90153 Tilburg, The Netherlands)

  • Gianluca Marcato

    (Department of Real Estate and Planning, Henley Business School, University of Reading, Reading RG6 6UD, UK)

  • Hans Op ’t Veld

    (PGGM Investment, 3700 AC Zeist, The Netherlands)

Abstract

By analyzing the adoption of the European Public Real Estate Association’s (EPRA) Sustainability Best Practices Recommendations (sBPR), we examine and discuss the application of transparent environmental, social and governance (ESG) ratings and their interaction with public real estate performance across European markets. Due to increasing concerns about the environment and the impact of investment on society at large, public property companies have made significant progress in improving transparency and enhancing the protection of shareholder value by sharing and reporting ESG best practices. We explore and review the EPRA sBPR database, which is highly useful for investors who are already screening listed real estate companies. Hence, in this project, we carefully study the diffusion process of this new ESG metric as a tool to enhance informational transparency regarding public real estate investment management and assess the effects of this transparency and ESG performance for the real estate stock returns. We find evidence of a sustainability premium that investors are willing to pay to access companies with better sustainable ratings.

Suggested Citation

  • Dirk Brounen & Gianluca Marcato & Hans Op ’t Veld, 2021. "Pricing ESG Equity Ratings and Underlying Data in Listed Real Estate Securities," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2037-:d:499054
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/4/2037/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/4/2037/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mario La Torre & Fabiomassimo Mango & Arturo Cafaro & Sabrina Leo, 2020. "Does the ESG Index Affect Stock Return? Evidence from the Eurostoxx50," Sustainability, MDPI, vol. 12(16), pages 1-12, August.
    2. Susanne Ethridge Cannon & Stephen C. Vogt, 1995. "REITs and Their Management: An Analysis of Organizational Structure, Performance, and Management Compensation," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 297-318.
    3. Franz Fuerst & Patrick McAllister, 2011. "Green Noise or Green Value? Measuring the Effects of Environmental Certification on Office Values," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(1), pages 45-69, March.
    4. Ferrell, Allen & Liang, Hao & Renneboog, Luc, 2016. "Socially responsible firms," Journal of Financial Economics, Elsevier, vol. 122(3), pages 585-606.
    5. Rob Bauer & Piet Eichholtz & Nils Kok, 2010. "Corporate Governance and Performance: The REIT Effect," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(1), pages 1-29, March.
    6. Craig Israelsen, 2005. "A refinement to the Sharpe ratio and information ratio," Journal of Asset Management, Palgrave Macmillan, vol. 5(6), pages 423-427, April.
    7. Eichholtz, Piet & Kok, Nils & Yonder, Erkan, 2012. "Portfolio greenness and the financial performance of REITs," Journal of International Money and Finance, Elsevier, vol. 31(7), pages 1911-1929.
    8. Janusz Brzeszczynski, Binam Ghimire, Tooraj Jamasb, and Graham McIntosh, 2019. "Socially Responsible Investment and Market Performance: The Case of Energy and Resource Companies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Yu & Lin, Boqiang, 2022. "Quantifying the extreme spillovers on worldwide ESG leaders' equity," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Arie Pratama & Edi Jaenudin & Syaiful Anas, 2022. "Environmental, Social, Governance - Sustainability Disclosure Using International Financial Reporting Sustainability Standards S1 in Southeast Asian Companies: A Preliminary Assessment," International Journal of Energy Economics and Policy, Econjournals, vol. 12(6), pages 456-472, November.
    3. Pierfrancesco De Paola & Francesco Tajani & Marco Locurcio, 2021. "Sustainable Real Estate: Management, Assessment and Innovations," Sustainability, MDPI, vol. 13(9), pages 1-6, April.
    4. Isil Erol & Umut Unal & Yener Coskun, 2021. "ESG Investing and the Financial Performance: A Panel Data Analysis of Developed REIT Markets," MAGKS Papers on Economics 202123, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Zifeng Feng & Zhonghua Wu, 2023. "ESG Disclosure, REIT Debt Financing and Firm Value," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 388-422, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Steffen Westermann & Scott Niblock & Michael Kortt, 2018. "Corporate social responsibility and the performance of Australian REITs: a rolling regression approach," Journal of Asset Management, Palgrave Macmillan, vol. 19(4), pages 222-234, July.
    2. Steffen Westermann & Scott J. Niblock & Michael A. Kortt, 2018. "A Review of Corporate Social Responsibility and Real Estate Investment Trust Studies: An Australian Perspective," Economic Papers, The Economic Society of Australia, vol. 37(1), pages 92-110, March.
    3. Avis Devine & Erkan Yönder, 2023. "Impact of Environmental Investments on Corporate Financial Performance: Decomposing Valuation and Cash Flow Effects," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 778-805, May.
    4. Jihwan Yeon & Seoki Lee & Phillip M Jolly & Anna S Mattila, 2023. "The impact of environmental management on firm performance in the U.S. lodging REITs: The moderating role of outside board of directors," Tourism Economics, , vol. 29(2), pages 513-532, March.
    5. Hui-Ching Hsieh & Viona Claresta & Thi Minh Ngoc Bui, 2020. "Green Building, Cost of Equity Capital and Corporate Governance: Evidence from US Real Estate Investment Trusts," Sustainability, MDPI, vol. 12(9), pages 1-21, May.
    6. Eichholtz, Piet & Holtermans, Rogier & Kok, Nils & Yönder, Erkan, 2019. "Environmental performance and the cost of debt: Evidence from commercial mortgages and REIT bonds," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 19-32.
    7. Parkinson, Aidan & De Jong, Robert & Cooke, Alison & Guthrie, Peter, 2013. "Energy performance certification as a signal of workplace quality," Energy Policy, Elsevier, vol. 62(C), pages 1493-1505.
    8. Deng, Yongheng & Wu, Jing, 2014. "Economic returns to residential green building investment: The developers' perspective," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 35-44.
    9. Isil Erol & Umut Unal & Yener Coskun, 2021. "ESG Investing and the Financial Performance: A Panel Data Analysis of Developed REIT Markets," MAGKS Papers on Economics 202123, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Niina Leskinen & Jussi Vimpari & Seppo Junnila, 2020. "A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties," Sustainability, MDPI, vol. 12(7), pages 1-22, March.
    11. Avis Devine & Andrew Sanderford & Chongyu Wang, 2024. "Sustainability and Private Equity Real Estate Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 161-187, February.
    12. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    13. Patrick Lecomte & Joseph Ooi, 2013. "Corporate Governance and Performance of Externally Managed Singapore Reits," The Journal of Real Estate Finance and Economics, Springer, vol. 46(4), pages 664-684, May.
    14. Monica Billio & Michele Costola & Loriana Pelizzon & Max Riedel, 2022. "Buildings’ Energy Efficiency and the Probability of Mortgage Default: The Dutch Case," The Journal of Real Estate Finance and Economics, Springer, vol. 65(3), pages 419-450, October.
    15. Avis Devine & Eva Steiner & Erkan Yonder, 2017. "Decomposing the Value Effects of Sustainable Investment: International Evidence," ERES eres2017_517, European Real Estate Society (ERES).
    16. Eichholtz, Piet & Kok, Nils & Yonder, Erkan, 2012. "Portfolio greenness and the financial performance of REITs," Journal of International Money and Finance, Elsevier, vol. 31(7), pages 1911-1929.
    17. Jian Liang & Ameeta Jain & Hao Wu, 2021. "Does Corporate Social Responsibility Vary by Real Estate Asset Types? Evidence from Real Estate Investment Trusts," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    18. Ana Ivanisevic Hernaus & Davor Zoricic & Denis Dolinar, 2023. "How competitive is SRI in developing financial markets: The case of Central and Eastern Europe," E&M Economics and Management, Technical University of Liberec, Faculty of Economics, vol. 26(2), pages 172-188, June.
    19. Rekha Pillai & Husam-Aldin N. Al-Malkawi & M. Ishaq Bhatti, 2021. "Assessing Institutional Dynamics of Governance Compliance in Emerging Markets: The GCC Real Estate Sector," JRFM, MDPI, vol. 14(10), pages 1-18, October.
    20. Kevin C. H. Chiang & Gregory J. Wachtel & Xiyu Zhou, 2019. "Corporate Social Responsibility and Growth Opportunity: The Case of Real Estate Investment Trusts," Journal of Business Ethics, Springer, vol. 155(2), pages 463-478, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2037-:d:499054. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.