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Greener REITs

Recently top-notch financial publication Barron’s and Calvert Research and Management, a leader in responsible investing and sustainability research, have published their annual REIT ranking listing the top 10 most sustainable real estate investment trusts in the U.S.

The study reviews the 93 largest REITS by market capitalization and ranks them over 5 categories of sustainability: shareholders, employees, customers, community, and planet.  The last area, planet, is the most influential in calculating the weighted average scores.

Planet sustainability, when it comes to REITs, focuses on the “green” qualities of the buildings in their portfolios. This means owning and managing buildings with certifications such as LEED, EnergyStar, and Fitwel. Every certification process is different and tends to specialize on specific elements of long-term sustainability, but in general inspections will drill in fields such as energy efficiency, waste management, water conservation, air quality, and access to amenities.

An interesting element of running a greener real estate portfolio, is that in addition to lessening its impact on the environment, it also carries some financial benefits. Buildings with green certification tend to command a rent premium (source: Brendan McCarthy, Calvert) and they are more likely to raise money with lower interest rates as more and more often traditional lenders do look for sustainable projects.

In the TOP TEN list, we recognize a few names that have been core positions for many years inmost of our REITs portfolios: Ventas, Boston Properties, Alexandria, AvalonBay.  The following is the complete Barron’s/Calvert table indicating 2022 and 2021 rankings: