Research conducted and published by the European Central Bank (ECB) analysed a sample of almost 2,000 listed companies across 24 industrialised economies over a 10-year period, from 2009 to 2019. It found that a one percentage point increase in the share of female managers leads to a 0.5% decrease in CO2 emissions.
Existing academic literature suggests that typical female traits including the more empathic nature of women, social sensitivity and risk aversion may make them more likely to factor in the environmental consequences of business decisions. Women may also be more inclined to counter climate change, as they are more likely to consider overall societal well-being without focusing narrowly on shareholders’ interest.
The need for businesses to tackle their carbon emissions head on stepped up a notch after global leaders reached consensus on key actions to address climate change at COP26. These include rules that will govern the 2015 Paris climate accord, which aims to limit global temperature rise since pre-industrial times to well below 2°C (ideally 1.5°C). After the Paris Agreement, organisations with greater gender diversity reduced CO2 by about 5% more than firms that are more male-oriented.
At the same time, the paper highlights how there is an opportunity to recognise how environmental, economic and social initiatives including diversity are interconnected, and how impact in one area can produce positive outcomes in another.
Giulio Velliscig, one of the authors of the ECB paper, said for those companies that are serious about meeting their net-zero objectives, the findings strongly supported the case for gender diversity at managerial level and beyond. He said companies should strive for 30% female representation, widely recognised as the tipping point for change and the threshold beyond which you cease to be a minority.
“Policymakers should complement climate-oriented policies with gender clauses aimed at improving gender diversity within corporations, as we proved that it helps with combating climate change,” Velliscig said.
Several studies already published have concluded how female board directors can exert a positive influence in achieving net-zero ambitions. One led by BloombergNEF and the Sasakawa Peace Foundation found that companies with at least 30% of women on their boards are outperforming their peers in climate policy and transparency.
The 2021 Sustainability Board Report concluded that women are driving board-level conversations on sustainability, with 52% of women on boards that were surveyed being ‘ESG conscious’, versus 36% of their male counterparts. Meanwhile, the most recent MSCI study on gender diversity found that companies with sustained board diversity (at least three women directors who have served for at least three years) had stronger reductions in carbon-emissions intensity than their sector peers, and were more likely to have environmental targets linked to executive compensation.
However, the ECB working paper was keen to understand the significance of women managers in driving positive environmental action in business, and it echoes discussions about the need for organisations to look at diversity more broadly and not just at the highest echelons of business.
“Board decisions shape firms’ environmental approach, but managers select the suitable strategy to achieve the objectives,” the paper says. “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.”
At the same time, the analysis shows that gender diversity at a managerial level has a stronger mitigating effect on climate change if females are also well-represented outside the organisation, for example, in political institutions and civil society organisations.
Dr Susanna Di Feliciantonio, Head of European Policy at ICAEW, said moves to mandate sustainability disclosures could eventually lead to more interesting research into the profile of the best-performing organisations. Just this week, MEPs and EU countries reached a provisional deal on the Corporate Sustainability Reporting Directive (CSRD), paving the way for mandatory sustainability reporting and sustainability assurance for large companies, including non-EU companies with substantial activity in the single market.
“As we move towards more integrated corporate reporting, including this week's decision on the EU CSRD, it will be interesting to see what other insights we will be able to gain from a significant increase in the disclosures that companies in Europe will need to make on ESG,” Di Feliciantonio said.
The report also warns of a trade-off between the climate-related benefits achieved by female managers and the financial repercussions that might stem the deployment of greener implementation strategies. “In the context of emissions reductions, low-carbon investments such as low-carbon technologies are indeed more capital-intensive, which makes investment risk and funding costs more significant, and yield longer-term results than their high-carbon alternatives,” the paper says.
• The Women in EU Finance Network, an ICAEW initiative, will host a webinar on 4 July asking whether gender diversity in the workplace can mitigate climate change. Click on the link to find out more and book your place.
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