Green building implementation is growing along with the increasing of people awareness in environment and socially responsible investment. Prior studies suggested that green building certification has positive impact on REITs’ financial performance especially in terms of market value, return and lower operational cost, but there is scarce of research that focus on the effect to cost of equity capital. Cost of equity capital is the market expected rate of return regarding to the perceived risk, which is used to measure the external equity financing cost. Green building certification which seen as more social and environmentally responsible is recognized as low risk investment, and thus hypothesized to has lower expected return or cost of equity. There are two parts of study conducted, the first study observes all U.S. REITs shows statistically significant effect of green building certification ownership in reducing cost of equity capital. The second study further examines only REITs with certified buildings and generates statistically significant result of the negative relationship between cost of equity capital with level of green building certification. It implies the level of green building certification also matters for the investors, not only the LEED green building certification ownership. This result could encourage REITs to participate in green building certification as it could reduce the external equity financing cost.

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