Sustainable Building Pays Off for Investors
New York, 19 June 2015 – The Carbon War Room released a study finding a link between the sustainability of buildings and the stock market performance of real estate investment trusts (REITs).
The study, commissioned by Carbon War Room to the University of Cambridge, is titled The Financial Rewards of Sustainability: A Global Performance Study of Real the Estate Investment Trusts.
José María Figueres, chair of the board of Rocky Mountain Institute and Carbon War Room, will refer to the study as part of his keynote speech at the ESG Summit, held at NASDAQ.
REITs own and frequently operate income-producing real estate – and represent an increasing focus of energy-efficiency and renewable energy stakeholders.
Modeled after mutual funds, REITs allow anyone to invest in portfolios of large-scale properties and typically offer high yields, providing investors with regular income streams, diversification, and long-term capital appreciation.
For the purpose of this study, the University of Cambridge used a dataset provided by GRESB, the leading standard for sustainability performance measurement and benchmarking in the real estate industry.
This data comes from the GRESB Survey of more than 442 detailed sustainability ratings for global REITs, from the period 2011–2014.
The 2014 GRESB Survey covered 56,000 buildings with an aggregate value of USD $2.1 trillion. Key findings of the report include:
- A higher sustainability ranking of REITs in the annual GRESB Survey correlates to superior financial performance. Both the returns on assets and returns on equity of REITs with high GRESB scores outperform their peers.
- Adjusted for risk, there is a significant link between portfolio sustainability indicators and REIT stock market performance.
- The study establishes for the first time that investing in sustainability pays off for investors in REITs, enhancing operational performance and lowering risk exposure and volatility.
- There remains significant room for improvement in the sustainability performance of REITs. Despite improvements in the REITs ratings in recent years, the median score of rated real estate companies in 2014 was 58 out of 100, underlining the vast untapped potential for further optimization of most REITs’ sustainability practices.
“The message has never been clearer: in real estate, smart business managers are investing in sustainability,” said José María Figueres, chair of the board of Rocky Mountain Institute and Carbon War Room.
“This study complements thought leadership and direct industry engagements that prove time and time again that what’s good for the environment is good for business, and that sustainable buildings offer higher returns for real estate investors.”
“GRESB provides institutional investors with the tools they need to actively engage with their real estate investments, with the aim to improve the sustainability performance of their investment portfolios, and the global property sector at large,” said Nils Kok, co-founder and CEO of GRESB.
“The positive relationship between GRESB scores and REIT performance documented in this report strengthens the foundational argument that engagement and focus on sustainability performance is critical to achieve a long-term competitive advantage for real estate investors and owners.”
“Previous studies have established links between sustainability and improved cash flow at the building level, but this study widens the lens to the level of institutional investors,” said Franz Fuerst, faculty member in the Department of Land Economy at the University of Cambridge.
“Using datasets provided by GRESB, we evaluated key financial indicators of REITS and uncovered a clear link between building portfolio sustainability and stock market performance.
About Carbon War Room
Carbon War Room (CWR) was founded in 2009 as a global nonprofit by Sir Richard Branson and a group of likeminded entrepreneurs to intervene in markets to accelerate the adoption of business solutions that reduce carbon emissions at gigaton scale and advance the low-carbon economy. CWR merged with Rocky Mountain Institute (RMI) in 2014 and now operates as an RMI business unit. The combined organization engages businesses, communities, institutions, and entrepreneurs to transform global energy use to create a clean, prosperous, and secure future
|A summary of the academic study for investors is available for download here|
|The full academic study is available for download here|