||The Green Alpha Index: Harvesting the Financial Premium of Green Factors in Real Estate Assets and Portfolios – An Empirical Methodology for Applied Decision Making
||Bernet, Juerg; Paul Lensing
||DESIGN: The aim of the Green Alpha Index is to identify and quantifythe material set of green factors attributable to a financial greenpremium on real estate assets and portfolios. A wide scope ofeconomic, environmental, social, and governance topics is consideredfor a robust determination of the relevant green impacts. The broadboundaries cover factors of asset and portfolio management as well asregional macro fundamentals. The Green Alpha is defined as thefinancial metric for the added value attributable to green factors;measured as the annual real rental growth differential per indicator orindicator group. / ANALYSIS: A multi-factor analysis identifies theGreen Betas; assessing the measurable risks from the impacts of greenfactors. The Green Alpha Index gives empirical evidence of GreenAlphas and Betas in commerical real estate investments across Europe.The research sample includes properties managed by CBRE GlobalInvestors EMEA and other recognized real estate investmentmanagement firms. The portfolio data is retrieved from assuredcorporate reports, the asset data from self-declared surveys, and theregional data from OECD statistics and other public sources. FINDINGS: The gathered evidence of Green Alphas and Betas facilitatesinvestors and managers in the implementation of green strategies intotheir business operations. The Green Alpha profile shows in a graphthe performance gaps of an asset in a portfolio relative to its peermarket. The index allows to drill-down the Green Alpha for any greenindicator or indicator group of each asset or portfolio. So managerscan see where enhancing green factors pays out best in enhanced realrental growth. Investors can use the Green Alpha Index to screeninvestments and managers for superior Green Alpha. Furthermore, theGreen Alpha Index can help companies with the benchmarking and theintegrated reporting of their financial and non-financial performance.
|Year of publication:
Bernet, Juerg; Paul Lensing (2016).
The Green Alpha Index: Harvesting the Financial Premium of Green Factors in Real Estate Assets and Portfolios – An Empirical Methodology for Applied Decision Making. 23rd Annual European Real Estate Society Conference in Regensburg, Germany,