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Gender diversity can reduce ESG risks: report

Gender diversity can reduce ESG risks: report

Jessica Yun
— 1 minute read

Companies with more women on their boards will be less likely to be tangled up in corporate environmental lawsuits, according to new academic research.

A new study from the University of Adelaide, titled Are women greener? Corporate gender diversity and environmental violations, has found “direct links” between gender diversity on company boards and corporate environmental violations.

The study looked at 1893 environmental lawsuits that were filed against 2001 US companies that currently or previously constitute the S&P Composite 1500 index between 2000 and 2015.

Companies with more female board directors tended to undergo less lawsuits – in fact, the average exposure to lawsuits was reduced by 1.5 per cent with every woman added to the board of directors, the study found.

This, “on an average environmental lawsuit (US$204 million), could equate to a saving of US$3.1 million,” the statement said.

Study author and Adelaide Business School senior lecturer Chelsea Liu said the findings could be explained by gender socialisation and diversity theory, which postulates that a group of people from different backgrounds tend to make better collective decisions because they contribute differing perspectives.

“Female representation on boards is most important where the CEO is male, and less important if the CEO is female,” Ms Liu said.

“Having a range of perspectives can result in improved corporate environmental policy, which in turn can reduce exposure to environmental lawsuits.”

Furthermore, gender socialisation theory suggests that women are brought up to be more empathetic to others, which could bolster environment-related decision making in board rooms, Ms Liu added.

“Previous research also found that female executives are less overconfident and more willing to seek expert advice than their male counterparts.”

Ms Liu argued that the study findings made a strong case for mandating gender quotas in boardrooms.

“With corporate environmental responsibility becoming a more important social issue, these findings can have significant implications for policymakers, investors and managers.

“Environmental violations not only have a significant impact on societies, but they can also cause devastating losses of shareholder value,” she said.

 

Gender diversity can reduce ESG risks: report
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