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Real Estate Industry and ESG performance: An asset allocation perspective

Author

Listed:
  • Massimo Biasin
  • Andrea Delle Foglie
  • Emanuela Giacomini

Abstract

This study investigates the risk-adjusted performance contribution of ESG REITs and real estate companies from a portfolio management perspective by comparing the diversification benefit of investing in conventional real estate indexes compared to ESG real estate indexes. Using a sample of European REITs and real estate companies from January 2006 to September 2022, we construct a set of novel ESG real estate indexes and shed light on the effect of ESG real estate investments in the portfolio risk-adjusted performance, testing three different models. The results suggest that the performance of portfolios using different strategies and levels of ESG screening in the real estate asset class varied, with the portfolio with the most stringent ESG requirements for real estate having the highest levels of volatility and return and the real estate portfolios with environmental screening having the best risk-adjusted performance. However, a socially responsible real estate portfolio would produce valuable positive externalities as real estate drives almost 40% of global emissions.

Suggested Citation

  • Massimo Biasin & Andrea Delle Foglie & Emanuela Giacomini, 2023. "Real Estate Industry and ESG performance: An asset allocation perspective," ERES eres2023_72, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2023_72
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2023-72
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    More about this item

    Keywords

    asset allocation; Esg; real estate companies; REITs;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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