Sustainability and Private Equity Real Estate Returns

Journal of Real Estate Finance and Economics, Forthcoming

38 Pages Posted: 10 Jun 2022

See all articles by Avis Devine

Avis Devine

York University - Schulich School of Business

Andrew Sanderford

University of Arizona

Chongyu Wang

Florida State University - Department of Risk Management/Insurance, Real Estate and Business Law

Date Written: May 30, 2022

Abstract

This paper explores private equity real estate fund performance and voluntary environmental, social, and governance (ESG) disclosures. Using data from the National Council of Real Estate Investment Fiduciaries (NCREIF), it examines the relationship between performance for funds in the Open-Ended Diversified Core Equity (ODCE) Index and reporting to the Global Real Estate Sustainability Benchmark (GRESB), a platform for disclosure about fund/firm-level ESG strategies and performance. The empirical analyses suggest four conclusions. First, there has been substantial adoption of and reporting to GRESB in the last five years, suggesting that reporting to GRESB is a form of table stakes for ODCE members. Second, GRESB participation and performance are both significant predictors of cross-sectional fund returns. Third, GRESB participation and performance are associated with the price appreciation component of fund total returns but not with the income component. Fourth, the relationships between fund returns and GRESB participation and scores are independent of local economic conditions. These results close an important gap in the literature about private equity real estate fund performance and ESG/climate change mitigation efforts in commercial real estate markets.

Keywords: Private Equity, Real Estate, ESG, Sustainability, GRESB, Benchmarking

JEL Classification: G31; G32; O30; Q55; Q56; R33

Suggested Citation

Devine, Avis and Sanderford, Andrew and Wang, Chongyu, Sustainability and Private Equity Real Estate Returns (May 30, 2022). Journal of Real Estate Finance and Economics, Forthcoming , Available at SSRN: https://ssrn.com/abstract=4126699

Avis Devine (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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

Andrew Sanderford

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

Chongyu Wang

Florida State University - Department of Risk Management/Insurance, Real Estate and Business Law ( email )

821 Academic Way
145 RBB
Tallahassee, FL 32306
United States

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