Are Green Labels More Valuable in Emerging Real Estate Markets?

29 Pages Posted: 8 Jun 2017

See all articles by Odilon Costa

Odilon Costa

Getulio Vargas Foundation (FGV) - Sao Paulo School of Business Administration

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Spenser J. Robinson

Central Michigan University - College of Business Administration

Wesley Mendes-Da-Silva

Getulio Vargas Foundation (FGV) - Finance, Accounting and Controllership Department of Fundação Getulio Vargas (São Paulo, Brazil)

Date Written: June 1, 2017

Abstract

This article investigates how emerging real estate markets price information conveyed by voluntary environmental certification schemes. In addition to low incidence of green buildings, developing countries typically exhibit weaker environmental performance due to limited capacity to enforce existing regulation. Therefore, we exploit the role of internationally accredited third-party environmental audit schemes. In addition to comparing labelled and non-labelled properties in a hedonic framework, we also examine pricing discrepancies related with the intention to certify (registration), but failure to achieve actual certification in a timely manner. Our results systematically indicate that labelled office properties in emerging markets yield a larger green premium than their peers from developed countries. Findings also suggest that failed applicants do not receive any green premiums and may be subject to discounts, depending on specification, beyond that of other non-green office buildings. These findings provide further evidence of the relevance of market diffusion and economic governance linked to the implicit pricing of environmental labels.

Keywords: eco-certification, office markets, emerging economies, signaling effects

JEL Classification: R33, Q01

Suggested Citation

Costa, Odilon and Fuerst, Franz and Robinson, Spenser J. and Mendes-Da-Silva, Wesley, Are Green Labels More Valuable in Emerging Real Estate Markets? (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2982381 or http://dx.doi.org/10.2139/ssrn.2982381

Odilon Costa

Getulio Vargas Foundation (FGV) - Sao Paulo School of Business Administration ( email )

Sao Paulo
Brazil
+962671717 (Phone)

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

Spenser J. Robinson

Central Michigan University - College of Business Administration ( email )

Mt. Pleasant, MI 48858
United States

Wesley Mendes-Da-Silva

Getulio Vargas Foundation (FGV) - Finance, Accounting and Controllership Department of Fundação Getulio Vargas (São Paulo, Brazil) ( email )

Sao Paulo 01313-902, São Paulo
Brazil

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