We examine how the implementation of Environmental Management Control Systems (EMCS) influences corporate cash holding policies. EMCS are implemented to integrate environmental objectives into strategic decision-making, we propose that they also serve as an internal monitoring mechanism by altering firms’ liquidity behaviour. We analyse a panel of 86,447 firm-year observations across 38 countries from 2005-2023. We employ ordinary least squares (OLS) as a baseline estimation method. To address endogeneity, we employ a difference-in-differences (DiD) framework using the EU Directive 2014/95/EU as an exogenous shock. To ensure robustness we employ propensity score matching (PSM) and a two-stage least squares (2SLS). We find that firms implementing EMCS hold significantly lower levels of cash. Further analysis reveals that EMCS mitigate agency problems associated with free cash flow, hence reducing managerial incentives to retain excess liquidity. The negative association is stronger in firms facing financial constraints and in those with an effective internal board. Our study extends the literature on the financial implications of EMCS by identifying it as a novel determinant of corporate cash holdings. More broadly, it contributes to climate finance, corporate finance, and agency theory by demonstrating how sustainability-oriented control systems function as internal monitoring mechanisms that shape firms’ liquidity policies.