IMPACT OF ESG RATINGS/CERTIFICATION ON S-REITS

Abstract

This research investigates the relationship between ESG performances (measured by GRESB scores) and S-REITs financial and market performance. It focused mainly on REIT performance through Return of Assets (ROA) and Return on Equity (ROE), and market performance via excess return. The sample consists of S-REITs listed on Singapore Stock Exchange (SGX) that have participated in GRESB assessments. After excluding S-REITs due to the lack of data and practicality, the sample size consisted of 73 observations. Through a qualitative study, mixed results in ROA and ROE relationship with ESG performance were observed. S-REITs that participated throughout the study period saw financial performance (ROA and ROE) negatively impacted. However, S-REITs that acquired their 1st GRESB score during the study period experienced positive impacts on financial performance. Moreover, research findings discovered that among the S-REITs ESG sub-components, ESG performance is heavily driven by the environmental sub-component. An interview with Fortune REIT assisted this research to delve deeper into ESG importance to REITs. This provided a holistic view on the relationship of each ESG sub-components to S-REITs.