The Sustainability Alpha

THE SITUATION. There is a growing demand for sustainable investment in green real estate. The management challenge lies in delivering both sustainable properties and investment returns. However, investment managers are lacking sound, measurable tools to implement responsible investment strategies.

THE APPROACH. Hence, an international research team developed the so-called 'Sustainability Alpha'. It measures the impact of sustainability indicators on the rental growth of investment properties. The integrated analytical model combines conventional regression techniques with behavioural concepts of game theory. The market analysis presented here lookes at real world data reported by about 40 leading investment and management companies on more than 1000 buildings in 23 countries of Europe. The data set covers economic, environmental, and social topics of asset management as well as the investment related macro fundamentals.

THE RESULTS. The 'Sustainability Alpha' analysis provides hard evidence for the financial impacts of sustainability in real estate. Investment performance is linked to the major sustainability fundamentals: economic prosperity, environmental regulation, and social conventions. Sustainable asset management can mitigate macro economic risks. And social excellence pays out even higher than environmental performance.

THE BENEFIT. Sustainable asset management drives rental growth. Managers can screen assets and portfolios for 'Sustainability Alphas' and realize their financial performance reserves. The 'Sustainability Alpha' profile shows them how to improve investment returns through enhanced sustainability.