IMPACT OF DIVERSITY AND INCLUSION ON CARBON EMISSION: EVIDENCE FROM A GLOBAL SAMPLE

Abstract

We investigate whether, how, and under what conditions workforce diversity and inclusion (D&I) improve corporate carbon emission by modeling environmental innovation (EI) as a mediating mechanism and institutional ownership as a moderating force over the period from 2015 to 2023. Using data from the Global Diversity Index and Inclusion Index provided by LSEG and a sample of 21,226 firm-year observations from globally listed firms, we find that both Diversity and Inclusion are positively associated with emission-reduction performance. Mediation tests indicate that EI is strongly related to lower emissions. Moderation analyses reveal stronger D&I effects among firms with higher institutional ownership, consistent with an engaged-ownership mechanism that converts inclusive human capital into credible decarbonization initiatives. Overall, the evidence supports an integrated capabilities-andgovernance account in which inclusion expands the firm‘s problem-solving frontier and innovation capacity, while institutional investors reinforce incentives and monitoring. The findings carry actionable implications for boards, asset owners, and regulators seeking to align D&I strategy with real-economy emission reductions.