A trio of dutch real estate finance economists have recently published a paper confirming higher returns for REITs that invest in buildings with energy standards and other green screening tools. I just found a great quick article on it at FS Insight (sharing what matters in finance and sustainability).
Maastricht University academics produced a great report that should support asset analysts and investment decision makes who are looking for a leg-up on competition. “We document that the greenness of REITs is positively related to three measures of operating performance – return on assets, return on equity and the ratio of funds from operations to total revenue,” say Piet Eichholtz, Nils Kok, and Erkan Yonder, has numerous scientific conclusions supporting green REIT preferences.
They continue from previous research that determined: “The general evidence indeed shows positive financial effects associated with better environmental performance. For example, commercial buildings with energy efficiency ratings command significantly higher rents, higher and more stable occupancy rates, and higher prices than otherwise comparable conventional buildings (Eichholtz, Kok, Quigley, 2010; Fuerst, McAllister, 2011). On the other hand, lower levels of energy efficiency and sustainability have been associated with an increased risk of obsolescence (Kok, Jennen, 2011).”
Although the paper is a couple of months old, I thought it would still be very useful for folks to review. I always enjoy a good academic article supporting the intuitions I have from my gut!