Companies with more than 30% female representation on their boards generally had better climate change-related governance practices over the past several years than companies with less diverse boards, according to a new study by BloombergNEF and the Japan-based Sasakawa Peace Foundation.
This trend proved to be true in particular for companies in the electric utility and metals and mining sectors, said the report. The researchers used the environmental disclosure scores of companies as a proxy for climate governance since the scores indicate a company's commitment to disclosing environmental data, the report said.
The researchers examined more than 11,700 companies around the world and across multiple sectors. The researchers found that the average environmental disclosure score of companies that had more than 30% of women on their board from 2017 through 2019 ranged from 26.61-27.16, according to data from the research BloombergNEF, or BNEF, provided S&P Global Market Intelligence. Over that same period, when females comprised 20%-30% of the board, companies had lower average environmental disclosure scores ranging from 18.20-20.27. Along those lines, companies that had no women on their board from 2017 through 2019 had average environmental scores ranging from 16.47-18.44.
"A gender-diverse workforce will bring in more experiences, knowledge, and skills to the table," the report said. By considering issues from multiple perspectives, diverse boards are "likely to emerge with solutions that all stakeholders of society find acceptable. They are less prone to engage in groupthink and make better decisions by keeping long-term implications in view." As such gender diversity in the workforce "is a vital pre-requisite to drive innovations for clean energy transition and implement strategies for timely climate action."
Overall, noted the report, the female ratio of board directors on companies increased by 2.8% between 2017 and 2019 to reach 16.1%. Federal policies of certain European Union countries that required corporate board diversity disclosures, as well as pressure from investors and consumers, have helped drive that uptick, the report said.
The study found that companies in higher emitting sectors such as oil and gas showed a limited correlation between emissions reductions and board diversity. That said, integrated oil and gas companies that have set scope 3 emissions targets — those focused on upstream and customer-side emissions from burning fossil fuels — have higher female board representation, the board said. For instance, Royal Dutch Shell PLC, which set a Scope 3 target in April, has five women on its 13-person board, according to S&P Global Market Intelligence data.