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<p>This study investigates why and with what financial consequences Real Estate Investment Trusts (REITs) engage selectively in Environmental, Social and Governance (ESG) practices across different institutional contexts. Drawing on stakeholder theory and shareholder value perspectives, we argue that REIT managers strategically prioritize social (S) and governance (G) dimensions over environmental (E) initiatives – a strategy we term “selective ESG”. Analyzing a panel of 269 REITs across North America, Europe, and Asia from 2012 to 2022, we find that the financial outcomes of this strategy are divergent and contingent on regional institutional pressures. In North America, selective ESG strategy enhances profitability and market valuations. Conversely, in Europe, where environmental policy is stricter and investor expectations are higher, selective ESG is penalized with lower financial performance. An event study further corroborates this divergence: North America market rewards REITs for enhanced selective ESG practices, while European markets reward REITs for less selective engagements. By demonstrating that the financial return to ESG is not uniform across regions, our research not only uncovers a subtle form of ESG washing but also highlights the critical, yet often overlooked, role of regional institutions in driving corporate sustainability outcomes.</p>

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An International Perspective of Selective ESG Engagement: Evidence from Real Estate Investment Trusts

  • 期刊论文

  • 发表日期：

    2026年6月17日

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  • Lu Yang,
  • Jianfu Shen,
  • Kwok Yuen Fan,
  • Louis T. W. Cheng,
  • Weisheng Lu

摘要

This study investigates why and with what financial consequences Real Estate Investment Trusts (REITs) engage selectively in Environmental, Social and Governance (ESG) practices across different institutional contexts. Drawing on stakeholder theory and shareholder value perspectives, we argue that REIT managers strategically prioritize social (S) and governance (G) dimensions over environmental (E) initiatives – a strategy we term “selective ESG”. Analyzing a panel of 269 REITs across North America, Europe, and Asia from 2012 to 2022, we find that the financial outcomes of this strategy are divergent and contingent on regional institutional pressures. In North America, selective ESG strategy enhances profitability and market valuations. Conversely, in Europe, where environmental policy is stricter and investor expectations are higher, selective ESG is penalized with lower financial performance. An event study further corroborates this divergence: North America market rewards REITs for enhanced selective ESG practices, while European markets reward REITs for less selective engagements. By demonstrating that the financial return to ESG is not uniform across regions, our research not only uncovers a subtle form of ESG washing but also highlights the critical, yet often overlooked, role of regional institutions in driving corporate sustainability outcomes.