The study, commissioned by the 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.
Real estate investment trusts (REITs) own and frequently operate income-producing real estate.
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 $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.