In light of current climate change discussions, this paper analyzes the effect of ownership structure on a firm’s environmental performance with a subsequent focus on corporate emission reduction. Based on a cross-national European sample consisting of 7384 firm-year observations between 2008 and 2017, this study explores the relationship between sustainable institutional investors and environmental performance. In line with prior research and embedded in an agency theoretical framework, the nature of institutional investors may act as a stimulating driver towards green business practices. Sustainable institutional investors are defined based on their signatory status to the UN Principles for Responsible Investment and their (long-term) investment horizons. The first classification stems from a content-driven sustainability perspective, while the second is derived from temporal sustainability. The results indicate that sustainable institutional ownership is positively associated with a firm’s environmental performance. Further investigations reveal that sustainable institutional investor ownership is also positively associated with firms’ willingness to respond to the Carbon Disclosure Project. These results indicate a higher carbon-risk awareness in firms with greater sustainable institutional investor ownership. Our paper significantly contributes to prior empirical research on institutional ownership and environmental performance and offers useful theoretical and practical implications. It focusses on a still-underdeveloped research area, namely organizations and their relationships with the natural environment, including institutional equity ownership as a driver towards greener practices on a corporate level.