Marcelo Cajias

Green Performs Better: Energy Efficiency and Financial Return on Buildings

This study investigates the effect of energy consumption on the financial performance of residential buildings in a large panel framework. Based on prior European studies regarding the use of energy performance certificates (EPCs), we analyse whether the responsible use of energy leads to a significant price differentiation between 2008 and 2010. Based on the IPD Databank and the German statistical office, our descriptive portfolio results show that energy efficient buildings have an up to 3.15% higher return and 0.76 €/m² higher rent prices than inefficient assets. Furthermore, (un-) conditional regression results provide evidence that one percent decline in energy consumption affects the total return of buildings positively by 0.015%, all else equal. The hedonic results additionally show that one percent energy conservation boosts rent prices by 0.08% and market value by 0.45%. Overall, our study presents alternative methodologies when describing and estimating hedonic data and offers the first empirical evidence of the energy price premium in German residential markets.

Green agenda and green performance: empirical evidence for real estate companies

Purpose – A green agenda has become a growing subject throughout an increasing number of European listed real estate companies over the last decade. The focus on sustainability is presumably not only goodwill or legislation driven but is rather a benefit driven action to achieve an economic surplus. The purpose of this paper is the development of an adequate sustainability definition, the investigation of the effect of a sustainability agenda on a company level, and the identification of possible financial benefits.Design/methodology/approach – This is an explorative qualitative and quantitative study. First, the authors developed a four‐bottom‐line real estate sustainability agenda in accordance with the guidelines of the European Public Real Estate Association and the Global Reporting Initiative. Second, the study examines 80 European listed real estate companies from 2006 until 2009, and third, the study applies a panel analysis with conditional and unconditional regression techniques.Findings – After ...

Do responsible real estate companies outperform their peers

This paper investigates the relationship between corporate social and environmental performance and financial performance for a sample of publicly traded US real estate companies. Using the MSCI ESG (formerly KLD) database on seven Environmental, Social & Governance dimensions in the 2003-2010 period, and weighting the dimensions according to prominence in the real estate sector, we model Tobins Q and annual total return in a panel data framework. The results indicate a positive relationship between ESG rating and Tobins Q but this effect is driven by ESG concerns rather than strengths. Consistently across all model specifications, overall ESG ratings are associated with lower returns. Negative scores appear to result in higher returns in the short run but positive scores have no significant impact on returns.

The asset allocation of sustainable real estate: a chance for a green contribution?

Purpose – Given the growing market awareness concerning responsible investments in recent years, the purpose of this paper is to bridge the gap between real estate companies which implemented a corporate social responsibility (CSR) agenda and the possible role within a multi‐asset portfolio optimisation framework. The behaviour of the asset class sustainable real estate (SRE) together with its diversification characteristics are the main focus.Design/methodology/approach – The study is an explorative empirical analysis applying a portfolio optimisation algorithm. First, the authors developed a sustainable real estate index comprehending listed real estate companies from 2004 until 2010 acting in line with a CSR agenda. Second, the authors introduced SRE into the opportunity set of an UK investor and finally, generated the theoretical optimal asset allocation of SRE within different risk‐return portfolios.Findings – The unique risk‐return pattern of SRE enables the asset class to be allocated across all po...

Are Energy Efficiency Ratings Ignored in the German Housing Market?– Evidenece from a large-sample Hedonic Study

Improving the energy efficiency levels of housing is of particular concern in the private rental market where capital costs and subsequent utility cost savings are not shared in equal measure by landlords and tenants. This problem is particularly pronounced in Germany where rental properties make up the majority of the housing stock. The present study is the largest and most comprehensive study of the value of energy efficiency in the German housing market and investigates the effect of energy efficiency ratings on rental values across 412 markets in Germany. Using a semiparametric hedonic model and an empirical sample of nearly 300k observations with full hedonic characteristics, we find strong evidence that energy-efficient rental units are rented at a premium. A survival hazard model is then used to study the impact of the ratings on time-on-market. It is found that energy-efficient rental properties tend to lease up more quickly than their non-efficient peers. This study provides a robust framework for policy makers and property companies for understanding how energy efficiency and expected utility costs of a rental property affect asking and effective rents.

A Class of its Own? The Role of Sustainable Real Estate in a Conditional Value at Risk Multi-Asset Portfolio

Current research on sustainable property investment focuses mainly on property-level profitability of green buildings along with the development and implementation of eco-certifications. A second strand of studies investigates the company-level financial implications of corporate social responsibility agendas. This paper seeks to expand the current literature by analyzing the effect of Socially Responsible Investments (SRI) within a multi-asset portfolio optimization model. It also attempts to bridge the existing gap in the real estate literature between sustainability principles and investment analysis. To this aim, listed real estate companies with an active sustainability agenda, identified through the MSCI ESG database, represent the sustainable real estate asset class. Applying a number of robust optimization techniques, we establish empirically whether diversification benefits can be achieved by investing in companies with a proven track record in sustainability. The results of the study highlight the potential contribution of listed real estate companies with high sustainability ratings to an institutional investor´s portfolio taking into account differences in investment style and risk aversion.