Examining North American REITs in a volatile interest rate environment with ESG characteristics

Abstract

This paper examines the empirical link between the Environmental, Social and Governance (ESG) performance and Long-Term Interest Rates with the financial performance of Real Estate Investment Trusts (REITs) for a consecutive 6-year period, 2017 to 2023. The dataset is comprised of 24 of the largest North American equity REITs by asset size, and the dynamic relationships are tested through a Panel VAR and Granger Causality model. The results support previous literature on the sensitivity of REIT returns to interest rate changes but find no evidence to support ESG performance as a positive driver of financial performance.