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SRI is not a positive discriminator of the performance of european landholding trusts

Thursday April 7,2011,

Following a previous work on stocks performances in the Eurostoxx 300, the research team of UFG-LFP has focused on the particular case of listed European landholding trusts in order to try to assess the market performance of companies selected using only extra-financial criteria.

The results show that SRI is not a positive discriminator of the performance of European landholding trusts. Indeed over the studied period, the "Best of SRI" companies have not been the best performers: they performed less than companies with a lower score (Average of SRI). Nevertheless, the integration of a SRI filter in an investment process improves the performance of the portfolio: the "Best of SRI" companies over performed the EPRA Europe Index and lower-rated companies (Worst of SRI). This outperformance of the "Best-Of " class, relative to the sector and "Worst of" class, does not translate into a better operational and financial efficiency, but rather a better understanding, by investors, of the growth pattern and risk of these companies.

The study aims to verify the relevance of SRI selection within the listed real estate sector and more specifically in the case of European landholding trusts (EPRA Europe universe). Several studies have confirmed the relevance - in financial terms - of an SRI approach in physical property. But what about listed real estate? The research on the subject shows a positive relationship between financial / stocks performances and social responsibility when the latter takes only into account the criterion of environmental and energy efficiency. However, the findings are less significant when other aspects are incorporated such as governance and social issues.

The goal of this work is twofold. First, an attempt to assess the contribution of SRI selection in the market performance of listed European landholding trusts by using the ranking system of the bank Sarasin. Second, an attempt to identify factors explaining the relative performance when it is proven

See online : UFG-LFP full report: SRI and listed landholding trusts (french version)

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