Since banks play a pivotal role in modern financial systems, they can help to accelerate the transition to a carbon-neutral economy if they make more sustainable lending decisions. A bank’s climate strategy and related decision-making depend on the trajectory defined by the board, which in turn depends on the board’s diversity. The presence of women in banks’ boardrooms can add value along several dimensions, as explained by sociological and physiological theories, as well as empirical evidence.
According to previous studies, female corporate directors and women, in general, are more likely to care about long-term societal issues, including climate change. However, the literature has not so far investigated the specific role played by the gender diversity of banks’ boardrooms in combating climate change. In this paper, The Bank of International Settlements studies whether and to what extent a greater female representation in banks’ boardrooms influences banks’ capability in “greening” the economy via lending decisions. They do this by using granular loan-level data from the euro area credit register matched with banks’ corporate governance variables and firms’ greenhouse gas emission information. Given the probable effect of the Covid-19 pandemic on banks’ lending patterns in 2020, they focus on the year 2019.