Bank climate change initiatives, ownership structures, and corporate governance mechanisms: Evidence from emerging economies

Abstract

Motivated by the growing attention on climate change acceleration, we examine the interrelationships among corporate governance disclosure index, bank ownership structures, and bank climate change initiatives through the lens of a multi-theoretical framework. We conduct a fixed-effects and dynamic two-step system generalized method of moments models over an extensive dataset. Based on panel data of 220 banks (2,785 observations) from 16 Sub-Saharan Africa emerging economies between 2007 and 2022, the study observes that banks with higher levels of corporate governance disclosure index engage in more climate change initiatives. The study shows that ownership by institutional and foreign investors is associated with more bank climate change initiatives, while government ownership reduces climate change initiatives. Further, we document that director ownership has no impact on climate change initiatives. The study documents that the association between bank ownership structures and bank climate change initiatives is positively moderated by the extent of the corporate governance disclosure index. This moderating impact improves for banks with high corporate governance mechanisms. Finally, we show that the bank ownership structures-climate change initiatives linkage and the moderating effect of corporate governance mechanisms on this nexus vary significantly across banks' operating periods. We identify corporate governance disclosure as the potential channel through which bank ownership structures and climate change initiatives are interlinked. Our findings call for banks to adopt and implement good governance disclosure to improve climate change initiatives. The findings make significant theoretical and regulatory contributions.