Does Climate Change Affect Investment Performance? Evidence from Commercial Real Estate

85 Pages Posted: 8 Nov 2021 Last revised: 27 Nov 2023

See all articles by Dragana Cvijanovic

Dragana Cvijanovic

Cornell SC Johnson College of Business

Alex Van de Minne

University of Connecticut - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 21, 2023

Abstract

Combining granular data on temperatures across the continental US with micro-level commercial real estate (CRE) data from 1980 to 2020, we study the impact of exposure to extreme temperature shocks on investment performance of CRE at the individual asset level. We find that exposure to extreme temperatures over the holding period significantly reduces average realized total and asset returns in CRE, as well as sale prices, with no significant effect on income returns. Our results are driven by higher climate-induced cash flow uncertainty of exposed assets. Heterogeneous treatment analysis by property sector lends some support to consumer demand channel.

Keywords: climate change, climate finance, commercial real estate, economic costs

JEL Classification: R30, F64, C21

Suggested Citation

Cvijanovic, Dragana and Van de Minne, Alex, Does Climate Change Affect Investment Performance? Evidence from Commercial Real Estate (November 21, 2023). Available at SSRN: https://ssrn.com/abstract=3956714 or http://dx.doi.org/10.2139/ssrn.3956714

Dragana Cvijanovic (Contact Author)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Alex Van de Minne

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

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