Does Corporate Governance Help to Reduce Carbon Emissions? Some Empirical Evidence

Résumé 0

Climate change is the biggest challenge that humanity is currently facing. Companies have become increasingly aware of the need to address this issue. They are affected by climate risks, just as their activities can contribute to climate change. In this paper, we analyze the role of firms in mitigating climate change through their model of corporate governance. We examine the impact of key organizational control and incentive arrangements (board size, board independence, board gender diversity, sustainability committee, and sustainability-based executive compensation) on firms' carbon emission intensities. Using a fixed effects model on a panel of 305 firms over the period 2015-2021, we show the importance of corporate governance for reducing Scope 1 and 2 emissions and reveal its limitations in efforts to reduce Scope 3 emissions. Board gender diversity, the presence of a sustainability committee, and the existence of sustainability compensation incentives help to reduce corporate carbon emissions. Our results also show that the effects are sensitive to the stock market index and to the type of industry. Based on these results, several managerial and political implications can be drawn to improve corporate carbon performance.