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Urban agglomeration and the relationship between environmental performance and profitability: evidence from global REITs

Year: 2026

Type: article

Abstract: This study examines how headquarters location in major urban agglomerations weakens the relationship between environmental performance (lower carbon emission intensity) and financial performance (higher profitability) in real estate investment trusts (REITs). Analyzing 375 REITs across 21 economies from 2017 to 2023, we identify a negative, non-linear relationship between carbon emission intensity and profitability. However, this relationship is significantly weaker for REITs headquartered in major urban agglomerations. While environmental performance generally enhances profitability, its impact is diminished in urban agglomerations due to three key mechanisms: weakened environmental differentiation, higher cost pressures, and systemic environmental challenges. In contrast, we find that REITs outside urban agglomerations exhibit a stronger negative relationship between carbon emission intensity and profitability, particularly driven by Scope 2 (indirect) emissions. By highlighting the geographical determinants of corporate sustainability, this study contributes to the discourse on spatial governance in urban agglomerations, emphasizing the need for location-specific sustainability strategies and policies.

Source: Journal of Chinese Economic and Business Studies

DOI: 10.1080/14765284.2026.2626125

Authors: Yishuang Xu, Voraprapa Nakavachara

Institutions: University of Manchester, Chulalongkorn University

Language: English

Topic: Sustainable Finance and Green Bonds

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Sustainable cities and communities, Climate action

Open Access status: green

Funder: Chulalongkorn University