Banks with more women in their boardrooms lend less to big polluting companies, according to new research by the European Central Bank.
Using granular credit register data paired with information on firm-level greenhouse gas (GHG) emission intensities, a team of researchers isolated credit supply shifts to reveal that banks with more gender-diverse boards gave less credit to environmentally harmful companies.
“The presence of women in banks’ boardrooms can add value along several dimensions, as explained by sociological and physiological theories, as well as empirical evidence,” the study explained.
“Female corporate directors and women in general are more likely to care about long-term societal issues, including climate change.”
Researchers revealed that female director-specific characteristics affected the lending behaviour when it came to polluting firms, since better-educated directors gave lower credit volumes to more polluting firms.
The study is a world first, regarding the influences of gender on boardroom banks’ capability to “green” the economy, leading to evidence that a greater female representation in the boardroom contributes to advancing the fight against climate change.
The study also found that the “green” effect of female board members is stronger in countries with more female climate-oriented politicians.
Exploring the potential influence of women in the boardroom on banks’ lending strategies is a critical step towards fighting climate change. The study noted several other previous studies which found that women were more community-minded, altruistic and caring than men.
“They are more likely to assume positions that prevent environmental risks with the potential to harm communities,” the study continued.
“Gender differences in value orientations help explain women’s greater attention to the environment.”
Female directors have a stronger orientation toward corporate social responsibility (CSR), compared to male directors who tend to be more focused on economic performance.
“By bringing different perspectives to the table and by adopting a more participative leadership style, women on boards might facilitate conversations and decisions on CSR-related tasks, being better able to manage the relationships with various stakeholder groups,” the study said.
“Women hold stronger beliefs than male peers about the detrimental consequences of poor environmental conditions for others, themselves and the biosphere and that these beliefs envis- aged a more pro-environmental attitude.”
As one study by the Climate Institute showed in 2019, women around the world undertake most of the decisions affecting households’ energy consumption — decisions that appear to be mindful and judicious.