ESG investing and the performance of JSE-listed real estate firms: a system GMM approach

Purpose: This study aims to examine environmental, social and governance (ESG) investing and its impact on the performance of Johannesburg Stock Exchange (JSE)-listed real estate firms. Design/methodology/approach: The study applies the two-step generalised method of moments framework to estimate the parameters of our regression model. Data on ESG scores and financial performance were collected from Bloomberg and Refinitiv Eikon, respectively, while data on macroeconomic factors were collected from the World Bank DataBank. The data collected were for the period of 2013–2022. Findings: The study reveals that composite ESG has a negative and significant impact on firm value as measured by Tobin’s Q. Social sustainability, on the other hand, had a significant and positive impact on both the return on equity and Tobin’s Q. Governance had a positive impact on return on assets, whereas environmental sustainability did not have a significant impact on either firm profitability or firm value. Practical implications: The results reveal that the sustainable scores of real estate firms have a positive association with the performance of listed real estate firms in South Africa and therefore, these firms should continue to pay greater attention to ESG investment during their investment decision-making. Originality/value: To the best of the authors’ knowledge, this study is the first of its kind to examine ESG investment and the performance of JSE-listed real estate firms using ESG data from Bloomberg. The study is expected to increase ESG investment understanding and interest in the property sector of South Africa.