Investors' ideology and corporate symbolic and substantive climate actions

Abstract Research Summary Prior research suggests that institutional investors' liberalism is associated with firms' engagement in environmental sustainability, yet whether this association manifests in symbolic or substantive actions remains unclear. Taking a question‐driven approach, our analyses of Russell 3000 firms (2010–2020) reveal that investor liberalism, measured as the proportion of donations made to the Democratic Party, is positively associated with symbolic climate actions only from 2016 onward (a period when political polarization intensified), reversing a negative association during 2010–2015. Its positive association with substantive actions from 2016 onward, however, appears only among consistent Democratic donors (stronger liberal values), among dedicated investors, or in firms without CEO duality (greater investor influence). These findings indicate that liberal investor ownership may encourage, rather than deter, firms' environmental decoupling. Managerial Summary Liberal institutional investors tend to favor greater corporate environmental sustainability efforts, but are they associated with firms' symbolic or substantive climate actions? Our findings based on U.S. firms reveal that across the full 2010–2020 period, firms with more liberal investors, as indicated by their Democratic‐leaning political donations, do not exhibit more symbolic or substantive climate actions. From 2016 onward, as political polarization intensified, firms with more liberal investors exhibited more symbolic climate actions but not substantive ones. During this period, only investors with stronger liberal commitment (i.e., consistent Democratic donors) are associated with more substantive actions. Democratic‐donating investors are also associated with more substantive actions when they are dedicated investors or when firm CEOs do not chair their boards.