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

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 ESG ratings and EPA air enforcement actions to construct measures of local corporate sustainability, we study this conjecture. To address the omitted variables concern, we conduct a pre- and post-trends analysis as well as an instrumental variables analysis using the Hot-Dry-Windy Index of Srock, Charney, Potter, and Goodrick (2018). We show that severe wildfires in a county increase significantly its corporate environmental sustainability in the following year. 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