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Prestigious award for UM research on green real estate

Maastricht University researchers Piet Eichholtz, Nils Kok and Erkan Yonder have won the 2013 FIR-PRI Award for Best Research Article for their article ‘Portfolio Greenness and the Financial Performance of REITs’. On Wednesday 13 November, PhD student Yonder accepted the award on behalf of the team during a ceremony at the French Social Investment Forum (FIR) in Paris. This is the fourth time that UM research has been awarded this prestigious prize. ‘This underlines our leading position in the field of sustainability and financial markets’, said Piet Eichholtz.

In the study, published in 2012 in the Journal of International Money and Finances, Eichholtz, Kok and Yonder looked at the effects of sustainability of commercial real estate on the business performance of REITs (Real Estate Investment Trusts) in the United States. They provided insight into the net benefits of green buildings for investment funds that have incorporated these buildings in their real estate portfolios.

In this study, the researchers combined data about LEED and Energy Star (sustainability indicators) certified buildings with information about the entire REIT portfolios. On this basis they calculated the proportion of green buildings for each REIT in the period from 2000-2011. They concluded that the ‘greenness’ of REITs is positively correlated with three business performance factors: 1) return on assets, 2) return on equity and 3) the ratio of funds from operational activities to total turnover. Furthermore, they showed that there is no significant relationship between the ‘greenness’ of real estate portfolios and exceptional equity returns. According to the researchers, this suggests that the higher cash inflows derived from investments in green real estate are already reflected in the stock prices. However, REITs with a larger proportion of green real estate show substantially lower market risks, in part because they are less exposed to fluctuations in energy prices. This keeps them better protected from the general fluctuations in the economic climate.

Eichholtz: ‘This is the first article that shows that sustainability leads to better financial results from real estate portfolios. This result is extremely important for institutional investors around the world.’

The FIR-PRI award is the most prestigious award in the field of sustainability in all of Europe and has a very good reputation in practical and academic circles.

FIR-PRI European Research Awards
In 2005, the FIR Award was launched to promote research in the field of Finance and Sustainability. By building bridges between the academic and financial communities and their stakeholders, the FIR Award stimulates practical, relevant academic research and interdisciplinary knowledge development about responsible investment. The FIR Award also aims to build a network of researchers in this field.
In 2011, the FIR Award created a partnership with PRI (Principles for Responsible Investments). Aspects of this partnership include the development of an international resource database and coordination between the yearly PRI Academic Conference and FIR Award Presentation.