Investigating ESG’s influence on European listed real estate market performance

This study employs Bloomberg data from six European listed markets to investigate the extent to which the performance of real estate companies can be explained by the Environmental, Social and Governance (ESG) attributes at the corporate level. By accounting for firm-level characteristics, we utilise Pedroni’s Cointegration and Granger Causality methods to examine long-term cointegration and causal relationships. Additionally, we construct panel regression models to explore the role of ESG attributes in determining firm- level performance. Key findings reveal no statistical evidence that ESG attributes depress the performance of listed real estate companies, as indicated by raw return, Sharpe ratio, and Tobin’s q. Notably, the causality analysis uncovers that certain ESG attributes indeed Granger-cause the performance indicators. For instance, higher environmental, social, and governance performance scores, as measured by the three aggregate Bloomberg ESG scores, lead to superior returns on both raw and risk-adjusted bases in the long run.