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

Author

Listed:
  • Sophia Bodensteiner
  • Lukas Lautenschlaeger
  • Wolfgang Schäfers
  • Andrew Mueller

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.

Suggested Citation

  • Sophia Bodensteiner & Lukas Lautenschlaeger & Wolfgang Schäfers & Andrew Mueller, 2025. "Decoding ESG Impact: How Advanced Sentiment Analysis Reveals ESG-related Textual Impact on REIT Returns," ERES eres2025_151, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2025_151
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    JEL classification:

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

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