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Schulich-led research has found ‘environmentally sensitive buildings aren’t about costing less, they are about being less risky.’David Cigan

The Globe's bimonthly report on research from business schools.

Sustainable commercial buildings designed to optimize energy use, as well as limit greenhouse gas, water and waste emissions, have been attracting an impressive amount of global investment dollars over the past decade.

Since 2010, the number of real estate investment firms assessed by the Global Real Estate Sustainability Benchmark has risen to 759 from 198, representing a gross asset value of $2.8-trillion (U.S.), according to Avis Devine, an associate professor at the Brookfield Centre in Real Estate and Infrastructure at York University's Schulich School of Business in Toronto.

In one sense, it's clear why the trend exists. Previous studies have found that green buildings are in hot demand by commercial renters and attract higher revenues than standard office spaces, for instance.

What hasn't been measured until now, though, is just how far the lucrative returns from sustainable real estate investment can ripple into an entire holding company and its shareholders.

Dr. Devine sought to address that gap in a new study offering what is reported to be the first complete picture of the relationship between global sustainable property investors, such as real estate investment trusts (REITs), and their superior stock market performance.

The study examines the effects of sustainable investment on the value and performance of listed real estate investment firms, comparing countries without (the United States) and with (Britain) mandatory environmental reporting on investment properties.

Chief among its findings, says Dr. Devine, is that "environmentally sensitive buildings aren't about costing less, they are about being less risky."

That decreased risk can then translate into financial benefits, such as decreased interest costs, a more highly valued firm and more cash flowing to shareholders.

Co-authored by Erkan Yonder of Ozyegin University in Istanbul, the paper recently won the 2017 Nick Tyrrell Research Prize, an international award recognizing science-based research in the investment industry.

Dr. Devine sees the research as a means to encourage more sustainable development by helping investors better understand and get the most of so-called "green premiums."

"I compare it to a person noticing their very fit neighbour owns a treadmill, and, therefore, deciding to purchase a treadmill as well. As we know, it's not owning the treadmill that makes the difference, it's how you utilize it," she says in an e-mail.

Since submitting the work for consideration under the Tyrrell prize, the researchers have moved on to complete a more robust version of the analysis first for the United States, and then with a second paper delving into comparisons with other markets.

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