Actions after Experiences: CEO Abnormal Climate Exposure and Corporate Carbon Reduction

Abstract

Using hand-collected CEO birthplace data of U.S. listed firms, we show that CEOs who are exposed to heightened abnormal climate trends exhibit a greater propensity to reduce corporate carbon emissions. Acknowledging the inherent long-term nature of climate change assessments, we use an innovative metric that takes into account a CEOs’ formative years and their weather experiences to quantify this relationship. The effect is not driven by CEO disaster experiences or firm’s exposure to climate change. With county-level data, we also verify our channel by showing people in areas more exposed to abnormal climate have stronger awareness towards climate change and are more likely to support carbon regulation. We find that CEO exposure to abnormal climate is a substitute for other factors that can promote carbon reduction, and the effect is unlikely an agency problem or greenwashing.

Keywords: Carbon emission, Climate change, ESG, Sustainable, CEO experience

JEL Classification: G02, G30, G34, Q54