Are Green Labels More Valuable in Emerging Real Estate Markets?

Abstract

This article investigates how emerging real estate markets price information conveyed by voluntary environmental certification schemes. In addition to low incidence of green buildings, developing countries typically exhibit weaker environmental performance due to limited capacity to enforce existing regulation. Therefore, we exploit the role of internationally accredited third-party environmental audit schemes. In addition to comparing labelled and non-labelled properties in a hedonic framework, we also examine pricing discrepancies related with the intention to certify (registration), but failure to achieve actual certification in a timely manner. Our results systematically indicate that labelled office properties in emerging markets yield a larger green premium than their peers from developed countries. Findings also suggest that failed applicants do not receive any green premiums and may be subject to discounts, depending on specification, beyond that of other non-green office buildings. These findings provide further evidence of the relevance of market diffusion and economic governance linked to the implicit pricing of environmental labels