The Response of Local Corporate Sustainability to Environmental Disasters: Evidence from Wildfires

Abstract

Environmental disasters are thought to increase the focus on corporate sustainability in the communities where they occur. Extracting data on wildfires (a frequent type of disaster in the U.S.), and using two rating agencies and EPA air enforcement actions to construct measures of local corporate sustainability, we study this conjecture. We show that severe wildfires in a county increase significantly its corporate environmental sustainability in the following year. This effect is not driven by pre-trends, such as the implementation of existing sustainability programs, nor does it exhibit post-trends, such as reversion or further growth of sustainability in later years. The impact is not homogeneous across counties: it is significant only in counties where the percentage of anthropogenic climate change believers is high, or where the majority of voters are Democrats.