Decarbonized dividend shares (DDS) : carbon pricing through corporate governance

Abstract This paper introduces the Decarbonized Dividend Share (DDS), a novel financial instrument that structurally aligns corporate governance with climate goals. The DDS mech- anism links shareholder rights–dividends and voting power–to verified climate performance. This mechanism reconfigures financial incentives from within the ownership structure. DDS embeds climate accountability directly into governance and capital flows, creating a form of implicit carbon pricing that does not rely on policy or taxation. The model simulates how repeated failure to meet targets gradually shifts equity returns, capital structure, and control, generating endogenous financial pressure toward decarbonization. The paper develops a transdisciplinary framework combining environmental finance, institutional design, and the planetary boundaries concept pionereed by Rockström et al. 2009. It formalizes the DDS within a principal-agent setting, showing how conditional dilution can replace monetary incentives when environmental outcomes are hard to monitor. It also analyzes the legal feasibility, investor behavior, and sectoral adaptation pathways. In contexts where carbon pricing faces persistent political hurdles, DDS offers a finance- based mechanism for embedding climate commitments into ownership architecture, trans- forming disclosures into enforceable, capital-linked accountability.