Climate Protest and Firm ESG Performance: Elucidating Global North–South Inequalities

ABSTRACT

In response to calls to keep global warming below 1.5°C, firms have employed responsible business practices in their operations. Neglecting their normative and ontological ethical obligations to their stakeholders has often attracted climate protests, posing a potential risk to business operations and their reputation by threatening their social licence. This study examines how climate protests influence corporate environmental management performance, highlighting disparities among firms in the Global North (GN) and Global South (GS). We use panel regression with fixed effects to analyse data on 3485 large firms worldwide between 2020 and 2024, comprising climate protest data from the Carnegie Endowment for International Peace and Environment, Social and Governance (ESG) performance data obtained from the London Stock Exchange Group. Our study finds that climate protests are positively and significantly associated with firms' environmental performance. Protest size also correlates positively, though to a lesser extent. Notably, protests in the GN exert a stronger influence and impact than those in the GS. Additionally, a firm's human rights record positively predicts its environmental performance, highlighting the interconnectedness of corporate social and environmental responsibility. The results further reveal significant variation across firms, with the association between climate protests and environmental performance being most pronounced among firms with lower ESG ratings. Our findings underscore the need for firms and investors to integrate the potential of climate activism into their environmental risk management strategies and highlight regional disparities in corporate climate responsiveness.