“Companies reduce their CO₂ emissions more when their managers have been exposed to excessively high temperatures”

Lhe action of companies is today a key element in the fight against global warming. Many studies have looked at the factors that could push them to act. They highlighted the role played by shareholder activism, carbon taxes, the presence of responsible investors, the fear of future regulations, or the reputational costs linked to climate inaction.

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The role played by a leader’s personal experience of climate change is, on the other hand, rarely highlighted. However, if awareness of the reality of climate change is generally done in an abstract way, through education or scientific evidence such as reading the IPCC reports, it is also done in a concrete way, by confronting the manifestations of climate change.

Individual awareness

And it does indeed turn out that companies substantially reduce their CO₂ emissions when their executives have been exposed to excessively high temperatures (CEO Exposure to Abnormally Hot Temperature and Corporate Carbon EmissionsAlexandre Garel and Arthur Petit-Romec, Economics Letters no. 210, January 2022). This suggests that these leaders revised their perception of the reality of climate change and then worked to reduce their companies’ emissions, either to mitigate their contribution to climate change or, more selfishly, to reduce their companies’ exposure to risk. of reputation and regulation linked to insufficient reduction of emissions.

Six hundred and forty-seven listed American companies were studied over the period 2002-2018. An executive is considered to have been exposed to an abnormally high temperature if the temperature in the city where he resides during the last twelve months is at least two degrees Fahrenheit higher than the average temperature observed for the same month of the year and the average annual temperature over the last ten years.

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Carbon emissions are scaled by company size, to account for the fact that larger companies tend to have higher emission levels.

The observation is as follows: companies whose managers have been exposed to abnormally high temperatures reduce their CO emissions on average₂ (direct and indirect) twenty-seven tons more, per million dollars of assets, than companies whose managers have not been subjected to abnormal temperatures. This corresponds to an average reduction in emissions of 378,000 tonnes.

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