THE RELATIONSHIP OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) SCORES AND REITS’ PERFORMANCE IN SINGAPORE

Abstract

This study examines the relationship between Environmental, Social and Governance (ESG) scores and Real Estate Investment Trusts (REITs) performance in Singapore. The research is motivated by the increasing importance of considering ESG factors in investment decision-making and the growing interest in sustainable investing. The study uses data from 10 REITs listed on the Singapore Exchange (SGX) across a 5-year ranging from year 2018 - 2022 and analyses the correlation between their respective ESG scores and financial performance metrics, such as total returns and dividends. The findings of this study suggest that there is a positive relationship between ESG scores and Singapore REITs’ performance. This means that REITs with higher ESG scores tend to have higher total returns and dividends. However, the study would like to also highlight that there are several limitations and confounding factors that could have contributed to the relationship, other than financial performance. The study has several implications for REIT investors and managers. Firstly, it highlights the importance of considering ESG factors when making investment decisions, since it could potentially lead to better financial performance. Secondly, it motivates managers to further focus on improving their ESG scores. Lastly, the study suggests that policymakers and regulators in both public and private sectors should work together to encourage more transparency and disclosure of ESG information by REITs, which can ultimately benefit both investors and society.