1. SIRP is funded by Mistra, the foundation for strategic environmental research

2. Drivers of Environmental Performance Some firms can afford, others cannot (Hong, 2011) Resource based view on environmental reporting quality (Clarksson, 2008) Country specific institutional factors (Ioannou and Serafeim (2010) – political and labor market instit. Firm specific factors (Artiach et al 2009) – Size and growth, to some extent profitability (but not free cash flow nor leverage)among DJSI

3. SIRP is funded by Mistra, the foundation for strategic environmental research Board Composition Board structure and KLD scores (Post et al, 2011) – Proportion of outside directors is associated with higher KLD scores – Three or more female directors higher ratings – Age and education Bord structure and negative events (Kruger, 2010) – Higher proportion of insider and experienced directors less incidents – More femals, less incidents – Higher insider ownership, less incidents

4. SIRP is funded by Mistra, the foundation for strategic environmental research Ethical Compass of the Board Personal traits, experiences and values of board members and executives influence their choices of environmental strategy and decision making concerning investments in CSR Managerial over-conficence, overoptimism, illusion of control and and sensation-seeking lead to: – Higher company debt levels (Ben-David, et al 2007) – Investment distortions (Malmendier and Tate, 2005) – Unsuccesful mergers and acquisitions (Roll 1986; Malmendier 2005) – Higher company risk-taking (Cain and McKeon, 2010) Personal traits related to criminal records of board members – High proportion of fraudulent board members leads to lower profitability and lower accounting quality (Amir et al 2010)

5. SIRP is funded by Mistra, the foundation for strategic environmental research Criminal/unethical history can imply 1.Excessive risk taking – underestimate environmental risks 2.Poor monitoring – less informed on environment 3.Over-optimistic group thinking 1.Or simply, less concerned about the environment! Hypothesis: There is a negative relation between the proportion of unethical board members and the environmental performance/environmental reporting quality of the firm.

6. SIRP is funded by Mistra, the foundation for strategic environmental research Past Unethical Behaviour Criminal convictions (CRIME it ) Non-payment record (PAYMENT it ) Serving on 3 or more boards of bankrupt firms (BANRUPTCY it ) BPURB it = CRIME it + PAYMENT it + BANRUPTCY it – A composite measure on the ethical compass of the board All variables are divided by the number of total board members. Thus, all variables are proportions of total board members.

7. SIRP is funded by Mistra, the foundation for strategic environmental research Swedish Data Nasdaq-Omx stock market index SIX 300 list GES-Investment services environmental ratings for the period 2005-2008 Total firm year observations with environmental data 837 of which 752 observations used Directors and CEO identified from The Swedish Financial Supervisory Authority (Finansinspektionen) Criminal records from The Swedish National Council for Crime Prevention (Brå)

8. SIRP is funded by Mistra, the foundation for strategic environmental research Crime data Information on all crimes conducted by Swedish citizens since 1974 – CRIME: not only found guilty and punished, but also suspected of serious crimes for which penalty is prison Different types of reckless driving (drunk driving as the single most common violation) Crimes against penal code (brottsbalken), different types of abuse, economic crimes etc No speeding nor parking!

9. SIRP is funded by Mistra, the foundation for strategic environmental research Characteristics of Sample Firms

10. SIRP is funded by Mistra, the foundation for strategic environmental research Unconditional analysis of determinants of environmental performance

11. SIRP is funded by Mistra, the foundation for strategic environmental research Environmental Performance

12. SIRP is funded by Mistra, the foundation for strategic environmental research Simultaneous estimation of Environmental Performance, Environmental Reporting and Financial Performance

13. SIRP is funded by Mistra, the foundation for strategic environmental research Summary of results The ethical compass of the board critical for the environmental performance of the firm A gender effect – more women on the board! Insider board ownership decreases EP FP (ROE) relates positively to EP, but EP relates negatively to FP (costly) The ethical compass does not relate to environmental reporting quality Environmental performance increases environmental reporting quality Size and leverage drives reporting