"Over time, a building that is poorly designed to withstand heat could lose value"
Interview with Boris Clivaz, CEO of GEFISWISS and shareholder of STEEN Sustainable Energy.
Read for you
Do ESG criteria really influence the value of a property?
Relying on a new methodology, a recent study aims to address a shortcoming: the insufficient amount of empirical evidence allowing a systematic link to be established between ESG criteria and financial performance in real estate.
3 min read
Still accounting for around a quarter of Switzerland’s CO₂ emissions, the real estate sector today faces a major challenge: its decarbonization. Despite recent criticism of ESG criteria, these criteria influence the entire industry, as noted by EY Switzerland: "ESG criteria exert a significant influence on the market value of real estate assets and must be taken into account in their valuation."
Like this analysis published in 2024, the desire to integrate ESG criteria into real estate is accelerating. A recent study — "From Buildings to Balance Sheets" — however highlights a gap: an insufficient number of empirical proofs to establish a systematic link between ESG criteria and financial performance in the real estate sector. "Most studies focus on individual buildings or on a single type of fund. Therefore, the heterogeneity of real estate investment vehicles (REIVs) remains largely unexplored."
The result of a collaboration between the Enterprise for Society Center (E4S) and the Center for Risk Management Lausanne (CRML), this research work involves a new methodology based on the in-depth analysis of a large sample of Swiss real estate investment vehicles (420 observations covering the period from December 2023 to June 2025), including listed and unlisted funds.
"In real estate, while the physical performance of buildings creates measurable value, internal policy initiatives pursue other objectives."
To examine the links between asset quality, operational performance and financial results, Fabio Alessandrini, Eric Jondeau and Nathan Delacrétaz compiled financial data, ESG indicators and physical characteristics of buildings (energy performance, technical quality, age and location). We summarize their conclusions in three key points.
1️⃣
Environmental dimension: While funds with high ESG scores show operating margins higher by about two percentage points, the study shows that only the environmental dimension (E) contributes significantly to this. This outperformance is linked to several aspects such as energy efficiency, emission reductions, or improvements to heating systems and building certifications. These elements directly reduce operating costs and strengthen the economic fundamentals of portfolios.
The social (S) and governance (G) aspects, on the other hand, have no measurable financial influence. According to the authors, their contribution is more aligned with non-financial objectives; they notably mention reputation benefits and reduced legal risk, i.e. "channels that are not captured by short-term margins".
The social (S) and governance (G) aspects, on the other hand, have no measurable financial influence. According to the authors, their contribution is more aligned with non-financial objectives; they notably mention reputation benefits and reduced legal risk, i.e. "channels that are not captured by short-term margins".
2️⃣
Financial performance: According to the three researchers, ESG scores are associated with an increase of around 1.3% in six-month returns, with an effect that amplifies as the analysis horizon lengthens. However, this result must be put into perspective, since the implementation of ESG strategies tends to partially offset operational gains at the level of overall profitability.
"Implementation costs limit net profitability gains, as compliance expenditures, reporting costs and green investments offset margin benefits," the report reads. This dynamic, however, varies according to the legal structure of the investment vehicles.
"Implementation costs limit net profitability gains, as compliance expenditures, reporting costs and green investments offset margin benefits," the report reads. This dynamic, however, varies according to the legal structure of the investment vehicles.
3️⃣
Notable differences: The ability to monetize ESG indeed depends on the degree of market discipline and the institutional framework in which the investment vehicle operates. For listed funds, for example, it appears advisable to adopt ambitious ESG integration: "The 2.3 percentage point margin premium and the 0.4 percentage point improvement in ROIC justify substantial ESG investments," the authors indicate, adding that transparency and reporting also constitute competitive advantages.
Furthermore, given the absence of financial impact from the social and governance dimensions, the authors of the study consider it judicious, for portfolios primarily focused on performance, to "emphasize environmental indicators rather than rely on aggregated ESG scores".
This dynamic is different for unlisted funds and foundations. For them, ESG criteria are primarily "a regulatory requirement and a tool for alignment with stakeholders, rather than a lever for performance differentiation". While unlisted funds record only an effect on margins, without translation into final performance, foundations, for their part, show no significant effect.
Furthermore, given the absence of financial impact from the social and governance dimensions, the authors of the study consider it judicious, for portfolios primarily focused on performance, to "emphasize environmental indicators rather than rely on aggregated ESG scores".
This dynamic is different for unlisted funds and foundations. For them, ESG criteria are primarily "a regulatory requirement and a tool for alignment with stakeholders, rather than a lever for performance differentiation". While unlisted funds record only an effect on margins, without translation into final performance, foundations, for their part, show no significant effect.
This study has the advantage of providing several elements that help better understand the relationship between ESG — particularly its environmental dimension (E) — and the attractiveness of the real estate sector. In terms of purely financial performance, it is notably relevant to question the usefulness of aggregated ESG scores, in favor of sector-specific frameworks. "In real estate, while the physical performance of buildings creates measurable value, internal policy initiatives pursue other objectives."
These works thus contribute to the development of a more complete analytical framework, likely to help investors, asset managers and public decision-makers better align financial and climate objectives in the real estate domain.
This article has been automatically translated using AI. If you notice any errors, please don't hesitate to contact us.
Read next
"Over time, a building that is poorly designed to withstand heat could lose value"
Interview with Boris Clivaz, CEO of GEFISWISS and shareholder of STEEN Sustainable Energy.
In Santa Marta, a decisive step toward the post-oil era has been taken
"By creating a more flexible space for dialogue, bringing together from the outset local authorities, indigenous peoples and economic actors, the conference sketches a model complementary to traditional UN negotiations," says Pierrette Rey, spokesperson for WWF Switzerland.
Divea, the EPFL spin-off that aims to filter and capture CO₂ at its source
Based near the Energypolis campus in Sion, the start-up is developing there a particular kind of capture technology: a graphene membrane perforated with holes at the molecular scale.
"Summer comfort has become an issue of public health and urban resilience"
Interview with Emanuel von Graffenried, director & partner at Bernard Nicod Conseils SA.