Does Climate Change Affect Investment Performance?

80 Pages Posted: 21 Jul 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

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 significantly reduces average realized total returns in CRE. This result is driven by reduction in asset returns. We do not observe a significant effect on income return. Our results are driven by higher cash flow uncertainty of exposed assets. Heterogeneous treatment analysis by property sector lends some support to consumer demand channel.

Keywords: climate change, commercial real estate, temperature extremes, cash flow uncertainty

Suggested Citation

Cvijanovic, Dragana and Van de Minne, Alex, Does Climate Change Affect Investment Performance?. Available at SSRN: https://ssrn.com/abstract=4517557 or http://dx.doi.org/10.2139/ssrn.4517557

Dragana Cvijanovic

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Alex Van de Minne (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

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