Investing in a Cleaner Future: The Role of Institutional Investors in Corporate Waste Management

As environmental sustainability gains prominence, institutional investors are increasingly recognized for their influence on corporate environmental practices. Despite this growing interest, their impact on waste management and circular economy initiatives is yet to be explored. This study seeks to bridge this gap by examining how institutional investors' ownership and investment horizon affect corporate waste management in France, where companies face increasing regulatory pressure under the 2015 Energy Transition Law. Analyzing 1001 firm‐year observations over 2011–2021 in France, the results reveal that long‐term (short‐term) institutional investors negatively (positively) affect waste generation. This suggests that long‐term investors exert pressure on managers to prioritize waste reduction strategies, supporting the neo‐institutional theory perspective. Further analysis shows that the effect of long‐term institutional investors on waste generation has accentuated after the adoption of the French Law on the Energy Transition in 2015, especially for firms with high environmental performance and strong corporate governance and those operating in environmentally sensitive industries. These results offer actionable insights for policymakers, investors, and corporate managers seeking to promote sustainable waste management practices.