Do Responsible Real Estate Companies Outperform Their Peers?

30 Pages Posted: 10 Dec 2011 Last revised: 28 Mar 2014

See all articles by Franz Fuerst

Franz Fuerst

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

Marcelo Cajias

PATRIZIA Immobilien AG

Patrick M. McAllister

University of Reading - Department of Real Estate and Planning

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School

Date Written: August 26, 2011

Abstract

This paper investigates the relationship between corporate social and environmental performance and financial performance for a sample of publicly traded US real estate companies. Using the MSCI ESG (formerly KLD) database on seven Environmental, Social & Governance dimensions in the 2003-2010 period, and weighting the dimensions according to prominence in the real estate sector, we model Tobin's Q and annual total return in a panel data framework. The results indicate a positive relationship between ESG rating and Tobin's Q but this effect is driven by ESG concerns rather than strengths. Consistently across all model specifications, overall ESG ratings are associated with lower returns. Negative scores appear to result in higher returns in the short run but positive scores have no significant impact on returns.

Keywords: Environment Social Governance, Corporate Social Responsibility, Corporate Financial Performance, Real Estate, Panel Data

JEL Classification: M14, D21, R33, C33, G30

Suggested Citation

Fuerst, Franz and Cajias, Marcelo and McAllister, Patrick M. and Nanda, Anupam, Do Responsible Real Estate Companies Outperform Their Peers? (August 26, 2011). Available at SSRN: https://ssrn.com/abstract=1808701 or http://dx.doi.org/10.2139/ssrn.1808701

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

Marcelo Cajias

PATRIZIA Immobilien AG ( email )

Fuggerstr. 26
Augsburg, 86150
Germany
+49 (0) 151 17215198 (Phone)

Patrick M. McAllister

University of Reading - Department of Real Estate and Planning ( email )

Reading RG6 6AW
United Kingdom

Anupam Nanda

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

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

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