From diversity to sustainability: Environmental and social spillover effects of board gender quotas

Abstract

Exploiting the staggered implementation of board gender quotas in Europe, this study examines their effect on firms’ environmental, social, and governance (ESG) performance. I find that firms’ environmental and social performance increases subsequent to the quotas and the rise of women’s representation on the board. I explore the mechanisms at play and show that the effect is driven by more ESG committees, improved innovation, resource use, and human rights considerations. The positive quota effect on environmental and social outcomes is strongest for less publicly exposed firms. My cross-sectional results suggest that the quota effect is partly crowded out by the positive sustainability effect of public pressure. Taken together, my results point towards positive spillover effects of a governance regulation on other sustainability dimensions. Further, they provide an understanding of the mechanisms behind these effects, relevant to policymakers and practitioners.