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Is ESG Commitment Linked to Investment Performance in the Real Estate Sector?

  • Marcelo Cajias

    ()

    (IREBS, University of Regensburg)

  • Franz Fuerst

    ()

    (School of Real Estate & Planning, Henley Business School, University of Reading)

  • Pat McAllister

    ()

    (School of Real Estate & Planning, Henley Business School, University of Reading)

  • Anupam Nanda

    ()

    (School of Real Estate & Planning, Henley Business School, University of Reading)

The linkage between corporate commitment to environmental, social and governance (ESG) issues and investment performance has generated a substantial body of research outside the real estate sector. Nevertheless, the relationship between the environmental performance and financial performance of companies is still not well understood as studies have found mixed and contradicting results. Drawing upon the KLD database which contains ratings on seven ESG dimensions from 2003-2009, this paper investigates the relationship between the ESG rating and the financial performance of a sample of US real estate firms. Since the primary transmission channel from ESG activities to financial performance may be better reflected by a firm's intangible assets, we model both Tobin's q and the total annual return in a panel framework with time and sector specific fixed effects. Our results are largely consistent with the existing literature finding a positive relationship between CFP and CSP. Further, the time scale of the lagged effects seems plausible.

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Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2011-03.

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Length: 37 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:rdg:repxwp:rep-wp2011-03
Contact details of provider: Postal: PO Box 218, Whiteknights, Reading, Berks, RG6 6AA
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Web page: http://www.henley.reading.ac.uk/

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  1. Eichholtz, Piet & Bauer, Rob & Kok, Nils, 2008. "Corporate Governance and Performance: the REIT Effect," Working Papers 08-3, University of Pennsylvania, Wharton School, Weiss Center.
  2. Bing Han, 2006. "Insider Ownership and Firm Value: Evidence from Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 32(4), pages 471-493, June.
  3. John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
  4. Aaron K. Chatterji & David I. Levine & Michael W. Toffel, 2009. "How Well Do Social Ratings Actually Measure Corporate Social Responsibility?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 125-169, 03.
  5. Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, 09.
  6. Horváthová, Eva, 2010. "Does environmental performance affect financial performance? A meta-analysis," Ecological Economics, Elsevier, vol. 70(1), pages 52-59, November.
  7. Jay C. Hartzell & Jarl G. Kallberg & Crocker H. Liu, 2008. "The Role of Corporate Governance in Initial Public Offerings: Evidence from Real Estate Investment Trusts," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 539-562, 08.
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