The Influence of ESG Ratings on the Returns of Real Estate Companies
Purpose: This study examines the influence of real estate companies' sustainability efforts on their economic success. Design/Methodology/Approach: We consider the 41 real estate companies that were included in the STOXX Europe 600 Real Estate Index for at least a few years in the period from 2017 to 2023. The pairs of values (ESG rating on the one hand and relative annual return on the other) are displayed as a point cloud in a coordinate system and provided with a regression line. The correlation coefficients (r) and the coefficients of determination (R2) are calculated. Finally, the Spearman test is used to check whether the slopes of the regression lines are significantly different from zero. Findings: For the period from 2017 to 2023, 41 large European real estate companies are examined to determine whether the ESG ratings of the London Stock Exchange Group (Refinitiv) have a significant influence on their relative annual returns. It is shown that there is no significant correlation between the ESG ratings on the one hand and the relative returns on the other. This applies both when the ESG ratings are set in relation to the relative returns of the same year and when the ESG ratings are set in relation to the relative returns of the following year. Practical implications: The respective annual return is calculated from the share price increase from the beginning to the end of the year plus the dividend payments made during the year. In order to exclude any distortion due to phases of good and bad (real estate) economic developments, the annual returns are not calculated in absolute terms, but in relation to the annual return of the Euro Stoxx 600 Real Estate Index. Originality/Value: Sustainability considerations are very important in society and politics, corporate success is significantly influenced by sustainability efforts is inaccurate, at least for large European real estate companies in the period from 2017 to 2023.