Climate Boards: Do Natural Disaster Experiences Make Directors More Prosocial?

We document that corporate directors’ past experience with abnormally severe climatic natural disasters shape their prosocial preferences and influence firm climate policies. Using detailed data on director career histories and county-level natural disasters, we identify Directors with Abnormal Disaster Experiences (DADEs). DADEs are significantly more likely to be affiliated with nonprofit organizations, consistent with heightened prosocial preferences. Importantly, firms with more DADEs on their boards exhibit lower scope 1 and 2 greenhouse gas emission intensities and are more likely to implement climate-related policies, including board climate oversight, emission targets, and management incentives to reduce emissions. These effects are driven by influential DADEs serving on governance, audit, or ESG committees, but absent among DADEs on finance, compensation, or risk committees, supporting a preference-based rather than risk-based mechanism. Independent directors, rather than the influence of CEOs, play a central role. The effects are stronger when disaster experiences are accumulated over longer histories and in large or high-emission firms. The results are muted in smaller disasters and not driven by recent trends in attention to climate change. Despite the role of preferences, firms with more DADEs do not exhibit worse financial or operational performance. Using director deaths as plausibly exogenous shocks, we provide causal evidence. Our findings show that directors’ experiences heighten their prosocial preferences that lead them to influence corporate climate policy.