Is it worth to be Green? A Performance analysis on European Green REITs.

Sustainability represents an innovative component of profitability for real estate finance, in line with the dynamics that characterize the today different sectors in the global landscape.Among other instruments, real estate funds which aim to ensure sustainability as an essential component of their investment strategy opt in diversifying their investment portfolios, including a "green" component represented by certified buildings.In instance, there has been a significant expansion of this segment within the US market, followed by a relatively recent development on the European framework.In light of these recent trends affecting the European market, the present research paper is intended to ascertain the impact of the "green" component on the financial performance of European REITs.In particular, the adopted selection criteria refer to the two European most widespread certifications: LEED and BREEAM, which provide standards for evaluating sustainable buildings from an environmental point of view. The objective is to demonstrate the degree of correlation between the adoption of implemented sustainable policies and financial performance (particularly, selected indicators have been: ROE, ROA, FFO and alpha).In addition, the widely validate state of the art Fama-French Five Factor Model has been applied for the estimation of funds performances, improving the meticulousness of the work as one of a kind.The rationale of this research arises from results of previous studies that investigated on green investment funds and comparable traditional funds performances, questioning whether pursuing green investment goals, would improve return performance (Eichholtz, Kok, and Yonder 2012).The work is oriented in validating the hypothesis, which states that sustainable and environmentally friendly components positively affect investment portfolios, focusing on the European property management industry.Therefore, this paper has the ambitious aim to fill the gap in current literature on REITs mainly focused on the US market.