Banks with more gender-diverse boards loan less capital to polluting firms, according to a European Central Bank (ECB) study.
The research found that banks with more than 37 percent female directors have around 10 percent lower lending volumes towards companies with higher pollution rates.
The authors described this as the “greening” effect of women board members. They also noted that the phenomenon is greater in countries with more women climate-oriented politicians.
The report is not the first to explore the connection between climate action and diversity at senior level. A paper published last year by The 30% Club and Oliver Wyman Forum examined the link between accelerating the transition to net-zero and greater gender diversity across stakeholder groups.
Rupal Kantaria, partner at Oliver Wyman and steering committee member of The 30% Club, noted that while correlation “does not necessarily mean causality, there is clearly value in looking at these two challenges together”.
“Climate and gender diversity are two challenges which require a similar approach, notably a change in behaviour,” she said. “They are intrinsically linked, but there are many factors which can influence this.”
Meanwhile Cameron Ireland, adviser at Callaway Climate Insights and former CEO at BoardEx, stressed the importance of looking beyond climate.
“Financial services have taken a keen interest in diversity,” he said. “We need to acknowledge that companies with diverse boards and leadership teams have better decision-making processes. However, I wouldn’t want to pigeonhole this for just climate change – there’s a bigger picture.”
Research released last year from RBC showed that women investors are more than twice as likely to consider ESG in their investments as their male counterparts.
The ECB paper was authored by Leonardo Gambacorta, head of innovation and the digital economy at Bank for International Settlements; Livia Pancotto, lecturer in banking at the University of Strathclyde; Alessio Reghezza, consultant at ECB; and Martina Spaggiari, financial stability expert at ECB.
The study covers the year 2018, using data from Refinitiv Eikon, Urgentum and the European Institute for Gender Equality, as well as the ECB’s supervisory database. The bank sample examines the lending behaviour of 52 banks, accounting for around 60 percent of banking total assets in the euro area.
The paper does not distinguish between executive and non-executive positions.