Does gender diversity in the workplace mitigate climate change?

Summary

Focus

At the 2021 26th Conference of the Parties (COP26), leaders from around the globe reached consensus on key actions to address climate change. These include rules that will govern the 2015 Paris climate accord, which aims to limit global temperature rise to well below 2°C (ideally 1.5°C) since pre-industrial times, and will provide funding to help countries to adapt to climate change. Studying how firms' organisational structure can affect climate change is thus relevant for policymakers. We hypothesise that women in managerial positions may be better suited than male managers to reducing firm CO2 emissions. Our hypothesis finds support in the literature which suggests that women are more inclined to counter climate change as they may be more likely to consider overall societal well-being without focusing narrowly on shareholders' interest.

Contribution

Contrary to previous studies that investigate how female board directors can influence firm CO2 emissions, we look at women managers' role. Board decisions shape firms' environmental approach, but managers select the suitable strategy to achieve the objectives. It follows that if female managers are more inclined towards environmental protection than their male peers, then firms with more female managers are likely to reduce their CO2 emissions more.

Findings

Using data for around 2,000 listed companies in 24 industrialised economies over the period 2009–19, we find that a 1 percentage point increase in the share of female managers leads to a 0.5% decrease in CO2 emissions. This effect is robust controlling for institutional differences due to culture and religion. At the same time, we show that gender diversity at the managerial level has stronger mitigating effects on climate change if women are also well represented outside the organisation. Finally, we find that, after the Paris Agreement, firms with greater gender diversity at the management level reduced their CO2 emissions by about 5% more than firms with more male managers.

Abstract

Does having more women in managerial positions improve firm environmental performance? We match firm-corporate governance characteristics with firm-level carbon dioxide (CO2) emissions over the period 2009-2019 to study the relationship between gender diversity in the workplace and firm carbon emissions. We find that a 1 percentage point increase in the percentage of female managers within the firm leads to a 0.5% decrease in CO2 emissions. We document that this effect is statistically significant, also when controlling for institutional differences caused by more patriarchal and hierarchical cultures and religions. At the same time, we show that gender diversity at the managerial level has stronger mitigating effects on climate change if females are also well-represented outside the organization, e.g. in political institutions and civil society organizations. Finally, we find that, after the Paris Agreement, firms with greater gender diversity reduced their CO2 emissions by about 5% more than firms with more male managers. Overall, our results indicate that gender diversity within organizations can have a significant impact in combating climate change.

Keywords: carbon emissions, female managers, global warming, Paris Agreement, green economics.

JEL classification: G12, G23, G30, D62, Q54.