Boards and ESG Performance: The Contingent Influence of Climate Vulnerability on Global Banks

ABSTRACT This study examines the contingent effect of climate vulnerability on the relationship between board characteristics and environmental, social, and governance (ESG) performance of global banks. We use a dataset of 438 banks across 54 countries (2010–2022) and fixed effects estimation, two‐stage least squares, and generalized method of moments to address potential endogeneity. Our findings show that the effectiveness of board governance mechanisms on ESG performance depends on the levels of climate vulnerability. Although most mechanisms perform well in low‐risk contexts, only CSR committees and gender diversity on the board improve ESG performance in stable and highly vulnerable environments. These results highlight the importance of integrating climate vulnerability into corporate governance frameworks, suggesting that a one‐size‐fits‐all approach to board composition is insufficient. This study underscores the need for adaptive governance strategies that align with regional climate risks and offers practical insights for regulators, investors, and executives to enhance ESG performance.