A meta-analysis of ESG factors in the real estate investment trusts sector: exploring their impacts on REITs performance
Zheng Zheng, Chyi Lin Lee
Abstract
Purpose This study aims to analyse the inconsistencies found in previous research regarding the impact of environmental, social and governance (ESG) factors on real estate investment trusts’ (REITs) performance. By identifying the individual contributions of each ESG pillar, the research seeks to clarify ESG’s role in determining REIT outcomes. Design/methodology/approach The study conducts a meta-analysis of 26 selected studies from a pool of over 300 academic papers that investigate the relationship between ESG factors and REIT performance. The meta-analysis aggregates regression findings from these studies, and logistic regression models are used to examine the distinct effects of each ESG factor on REIT performance. Findings The results indicate that the environmental and social pillars significantly influence the relationship between ESG and REITs performance. The social factor consistently shows a positive and significant effect, while the environmental factor is significant but with an unclear direction of influence. The governance factor does not show a significant impact, suggesting that under the current REITs regulatory framework, governance is less influential. The results address the distinct contribution of ESG factors in shaping REIT outcomes across different market contexts and time periods. Moreover, the positive impact of the social pillar aligns with Freeman’s (1984) social impact hypothesis, which suggests that business practices associated with stakeholders’ interests positively affect financial performance. Originality/value This study enhances the understanding of ESG factors’ impact on REITs by being the first to systematically analyse the underlying reasons for the varied outcomes in previous research. It is also the first attempt to employ meta-analysis in exploring the theoretical foundations of ESG effects within the real estate and construction sectors. The findings assist investors in making more informed decisions based on ESG components and offer guidance for policymakers in crafting regulations that better reflect the influence of ESG factors.