Decomposing the Value Effects of Sustainable Investment: International Evidence

33 Pages Posted: 22 Feb 2017

See all articles by Avis Devine

Avis Devine

York University - Schulich School of Business

Eva Steiner

School of Hotel Administration, Cornell University

Erkan Yönder

John Molson School of Business, Concordia University

Date Written: February 20, 2017

Abstract

While some evidence exists on the benefits of sustainable investment for publicly traded real estate firms, little is known as to how such benefits materialize within the firm, especially on an international scale. We decompose the effects of sustainable investment on the value and performance of listed real estate investment firms across countries with and without mandatory environmental reporting on investment properties. In the US, a country without requisite reporting, we find that REITs with a more sustainable portfolio experience higher rental income, higher operating expenses, and lower interest expenses, increasing cash flows available for distribution to shareholders. These firms also carry lower systematic risk, are subject to less uninformed trading, and attract higher premiums to NAV. We find less nuanced results for real estate investment firms in the UK, which face mandatory environmental reporting. Our findings suggest that environmental reporting requirements may facilitate improvements in the environmental performance of properties and enhance transparency.

Keywords: Real Estate Investment Trusts, Sustainability, Energy Efficiency

JEL Classification: Q01, Q55, R33, M14, Q54

Suggested Citation

Devine, Avis and Steiner, Eva Maria and Yönder, Erkan, Decomposing the Value Effects of Sustainable Investment: International Evidence (February 20, 2017). Available at SSRN: https://ssrn.com/abstract=2920788 or http://dx.doi.org/10.2139/ssrn.2920788

Avis Devine

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://schulich.yorku.ca/faculty/avis-devine/

Eva Maria Steiner (Contact Author)

School of Hotel Administration, Cornell University ( email )

465B Statler Hall
Ithaca, NY 14853
United States

HOME PAGE: http://https://sha.cornell.edu/about/directory/instructors/ems457

Erkan Yönder

John Molson School of Business, Concordia University ( email )

Montreal
Canada

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