THE ECONOMETRIC CASE FOR ESG IN REAL ESTATE VALUATION

This article presents a detailed framework for an econometric analysis of how Environmental,
Social, and Governance (ESG) factors impact building valuation. It argues that while
traditional valuation models were not designed to accommodate these intangible metrics, a
quantitative, data-driven approach is essential for capturing their financial implications.
Using a hedonic pricing model as the primary methodology, the study demonstrates how the
specific value of ESG attributes—such as green building certifications, energy efficiency, and
social-wellbeing features—can be isolated and quantified. The analysis synthesizes market
evidence to show that ESG-aligned buildings not only command price and rental premiums
but also provide a critical hedge against "brown discounts" and long-term risks, from climaterelated events to regulatory obsolescence. Ultimately, the report concludes that ESG is no
longer a peripheral consideration but a core driver of value creation and a powerful tool for
risk management, underscoring the need for a standardized, evidence-based approach to a
rapidly evolving market.