Renewable Governance: Good for the Environment?

We test the impact of firms’ corporate governance structures (G) on firms’ environmental performance (E) in an international sample. We find strong evidence that better governance improves firms’ environmental performance, including in settings where environmental risks are most salient. Governance mechanisms that focus on board renewal through enhanced investor power in director elections or appointment of female directors are associated with the greatest improvements. Quasi-exogenous shocks to these board renewal mechanisms support a causal interpretation—that is, G drives E. Female directors have a stand-alone impact, as the positive female director effect holds when we directly control for director characteristics.