Examining the dollar benefits of investing in Australian REITs with more sustainability approaches

Introduction Sustainability has attracted immense attention in the built environment, increasing calls for further motivation to accelerate the adoption of clean energy technologies by property stakeholders. Highlighting the financial benefits of green initiatives from investors' perspectives will encourage or maintain efforts towards a sustainable property sector. Methods The study analyses key annual stock market indices such as Earnings per Share [EPS], Price-Earnings Ratio [PE], Market-To-Book Ratio [MTB], Net Tangible Asset [NTA] per share, and Dividend Yield [DY] to assess the financial performance and risk profile of equity holders in a sample of 17 A-REITs before and after the implementation of the Commercial Building Disclosure Program [CBDP]. This is supplemented by a fixed effects regression model to estimate the drivers of dividend yield. Results There is a general rise in EPS and PE, along with stability in MTB and NTA, following the implementation of the CBDP legislation. This indicates a boost in the financial performance of REITs and a reduction in stock earnings volatility after CBDP. From our fixed effects regression model, improved market capitalisation increases dividend yield, while asset depreciation does not. Discussion Using stock market indices provides a clearer and more practical understanding of the financial gains from green investments. These findings could guide the decisions of current and prospective equity investors in the REIT market, REIT managers, policymakers focusing on sustainability, and advocacy groups.