Does Board Gender Diversity Affect Renewable Energy Consumption?

To the best of our knowledge this is the first study to investigate whether the presence of female directors in the boardrooms of US corporations increases the consumption of renewable energy as a share of total energy consumption. Renewable energy includes energy from wind, solar, biomass, small-scale hydro, and waste sources. Increasing the share of so-called clean energy is an important step in mitigating climate change caused by the consumption of fossil or dirty energy. Indeed, the consumption of the latter type of energy emits large quantities of carbon dioxide (CO₂) into the atmosphere, emissions which have been blamed for global warming.

We expect female directors to be more likely to use renewable energy given differences in morality and ethicality across genders. Already Sigmund Freud pointed out that there are such differences. What are these differences? First, for women the definition of morality is much more far-reaching than for men. For women, ultimately morality is about making the world a better place and reducing the pain and suffering of others. In contrast, for men, morality can be summarised as “live and let live”. In other words, men define morality in terms of their rights and how their rights as an individual relate to the rights of others. Morality can then be summed up as non-interference with the rights of others. Second, there are also differences between men and women in terms of the nature of helping behaviour. For women, helping behaviour tends to be of the nurturing kind and it is also typically provided over the longer term. For men, helping behaviour is of the heroic type and it is short-term: it is about saving somebody else from immediate danger or trouble.

Recent research suggests that these gender differences in morality and ethicality do matter, including for corporate decision making, including environmental corporate social responsibility (CSR). More specifically, research suggests that companies with (more) female directors attach more importance to CSR, are more likely to express environmental concerns and to adopt pro-environmental behaviours, take environmental protection more seriously, disclose more information on environmental issues, and invest more in renewable energy as well as reduce CO₂ emissions across their value chain.

While we argue that female board representation increases renewable energy consumption, we nevertheless expect that there needs to be a critical mass of at least two female directors on the board for this effect to be observed. In addition, we expect this positive effect to stem mainly from female independent directors.

We study a sample of 1,491 US firms for the period of 2008 to 2016, amounting to 11,677 firm-year observations. What do we find? We observe a positive effect of female directors on renewable energy consumption. However, as per our expectations, this effect is only found for firms with two or more female directors, confirming the need for a critical mass of female directors in the boardroom. We also find that this effect is mainly observed for independent female directors. Finally, we also observe a positive effect on firm performance of the interaction between female directors and the share of renewable energy consumption in total energy consumption, suggesting that the combination of female board representation and the consumption of clean energy creates shareholder value.

Our research has important policy implications. Not only does it further strengthen the business case for having female directors in the boardroom, but it also suggests that policy makers intent on tackling global warming may want to encourage corporations to appoint more female directors.