Board gender diversity and strategic ESG balance: Evidence from U.S. public firms

This paper examines how board gender diversity affects the strategic balance of environmental, social, and governance (ESG) initiatives in U.S. public firms through a novel ESG balance score that captures the alignment between a firm's ESG component weights and those commonly observed within its industry, proxied in this study using industry specific Refinitiv/LSEG ESG materiality weights. Using 9452 firm-year observations from 2013 to 2022, we find that female board representation is positively and significantly associated with better ESG balance. However, this relationship is moderated by firm characteristics and exhibits significant nonlinearities and sectoral heterogeneity. Threshold analysis reveals that female representation below 12.5% has negligible effects on ESG balance, the impact peaks between 12.5 and 27.3%, and diminishing returns set in thereafter. Our findings suggest that board gender diversity is associated with stronger ESG performance while also contributing to a more effective allocation of efforts across environmental, social, and governance dimensions in alignment with industry standards. These results highlight the critical need to use our ESG balance score alongside traditional ESG measures to accurately assess corporate sustainability efforts. Given its ability to reveal allocation patterns that aggregate scores may overlook, this metric complements traditional ESG scores by offering a deeper understanding of the internal structure of firms' sustainability strategies.