This paper examines whether CEO political orientation is associated with firms’ climate-related pledging behavior, with particular emphasis on the quality, scope and potential for greenwashing in greenhouse gas emissions reduction commitments.
Incorporating CEO’s individual political contributions, corporate climate pledges and their characteristics, and both CEO- and firm-level controls, our sample includes 4,636 firm-quarter observations over the period 2015 to 2023. We utilize logistic, ordinary least squares (OLS), and ordered probit regression models to examine the association between CEO political orientation and the quality of corporate climate commitments.
Consistent with upper echelons theory, we find that climate pledges made by Republican-leaning CEOs are, on average, less ambitious and less transparent than those made by firms led by Democrat-leaning CEOs. At the same time, CEO political orientation is not associated with the likelihood that a firm makes any climate pledge, consistent with greenwashing behavior affecting the quality of pledges rather than the overall rate of pledging.
Our study’s insights regarding the credibility of climate pledges can aid investors when integrating Environmental, Social and Governance information into their decisions.
In a time of political polarization, views of climate change are extreme and opposing. Yet, the scientific consensus is that it poses a critical threat to business, to society and to the planet. With business playing a major role in greenhouse gas emissions, CEOs will be pivotal in addressing climate change as demonstrated by the results of our research.
This study is the first to investigate voluntary climate-related pledges by firms and the effect of CEO politics on pledging behavior.
