“Sustainability disclosure and financial performance: The case of private and public real estate,” a new paper in the Journal of Portfolio Management, examines the sustainability performance of publicly-listed Real Estate Investment Trusts (REITs) and private real estate.
The paper is authored by Avis Devine, associate professor in real estate finance and sustainability at the Schulich School of Business at York University in Toronto, Nils Kok, professor of real estate finance at the School of Business and Economics at Maastricht University, and Chongyu Wang, assistant professor in the Department of Risk Management/Insurance, Real Estate and Legal Studies at Florida State University’s College of Business.
The paper utilizes GRESB’s reporting framework to support three principle findings:
- Historically, REITs have exhibited superior sustainability performance compared to private funds. However, the researchers have found that this performance gap has been narrowing in recent times.
- When REITs outperform private equity, such an outcome typically occurs across various subcomponents, including measures of management, asset-level performance, and green building certification activity.
- Regarding the correlation between sustainability performance and financial outcomes, those reporting on sustainability are outperforming their counterparts that do not engage in such reporting (among listed REITs).
The research, sponsored by Nareit, also covers differing approaches to sustainability commitments and disclosure, exploring the interplay between sustainability disclosure and performance within the realm of REITs. This is particularly relevant given divergent decisions made by public and private real estate entities regarding sustainability commitments and disclosure.
GRESB would like to congratulate the three authors on their new scholarship and timely contribution.
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