Sustainability ‘Pays Off’

AMSTERDAM — A comprehensive new study entitled, The Financial Rewards of Sustainability: A Global Performance Study of Real Estate Investment Trusts, has recently shown that sustainable facilities do financially “pay off,” performing more efficiently than their less sustainable competitors and better in the stock market.

Although energy efficiency benefits of green design have been well documented over the years, this study ultimately found that higher sustainability rankings were strongly correlated with higher financial performance. These performances involve both returns on assets and equity outperforming the results of facilities with lower scores from Global Real Estate Sustainability Benchmark (GRESB), an industry-driven organization is widely recognized as the global standard for portfolio-level sustainability reporting in the real estate sector.

"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, in a press release.”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."

Including data from 56,000 buildings with an aggregate value of $2.1 trillion, the research involved in completing this study utilized information from the GRESB survey of more than 442 detailed sustainability ratings for global REITs from the period 2011-2014. This inquiry serves as an annual assessment of the sustainability performance of real estate portfolios around the world.

"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.

The discussed research project was commissioned and released by Carbon War Room, a non-governmental organization, to the University of Cambridge, and additionally presented a link between real estate portfolio sustainability indicators and stock market performance. It also demonstrated a strong correlation between improved operational performance and lowered risk exposure and volatility associated with green designs.

“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,” explained Jose Maria Figueres, chair of the board for Carbon War Room.

With the median score of real estate companies in 2014 coming in at 58 out of 100, this study further asserts that opportunities for increased profitability and green performance are still plentiful, and that there is untapped potential to optimize sustainability and increase building value.

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