Climate change risk and corporate risk-taking: Do board gender diversity and environment, social and governance performance matter?

Purpose This study aims to examine how climate change risk (CCR) affects corporate risk-taking (CRT) and whether board gender diversity (BoGD) and environment, social and governance (ESG) performance moderate this effect. Design/methodology/approach This study applies a two-step generalized method of moments to a sample of 10,874 firm-year observations from 2,146 nonfinancial firms across 34 countries over the 2010–2021 period. Findings This study supports robust and credible core findings: CCR is positively associated with CRT and BoGD and ESG performance notably moderate this association. These findings rely on the value-enhancing hypothesis and highlight that BoGD and ESG performance act as self-defense control mechanisms against adverse climate events and excessive CRT. Moreover, they are robust to several rigorous checks. Practical implications By offering an advanced understanding of the connection between CCR and CRT and the constructive effects of BoGD and ESG performance on this nexus, this study adds to the growing practical evidence underlying climate changes twofold: managers have to behave less risk-averse and policymakers are called to embrace relevant corporate governance and sustainable initiatives to help firms mitigate CCR. Originality/value This study establishes a robust theoretical and empirical foundation for examining the extent to which BoGD and ESG performance matter for the CCR-CRT nexus. It contributes to the current international discussion on CCR, CRT and sustainable corporate governance and has implications for researchers, business practices and regulatory issues.