This paper studies whether and how environmental, social, and governance (ESG) disclosure regulations imposed on banks generate transmission effects along the lending channel. I use a setting of U.S. firms borrowing from non‐U.S. banks and exploit the staggered adoption of ESG disclosure regulations in banks’ home countries. I find that exposed borrowers of affected banks improve their environmental and social (E&S) performance following the disclosure mandate. Consistent with banks enhancing both their engagement and selection activities, affected banks impose more environmental action covenants in loan contracts, and they are more likely to terminate a borrower with bad E&S records following the regulation. Further evidence shows that the transmission effects are stronger when a disclosure regulation is well‐enforced (as indicated by a greater increase in banks’ disclosure) and among borrowers with greater switching costs. Collectively, the findings document the role of lending relationships in transmitting the real effect of ESG disclosure regulations from banks to borrowing firms

Using a wide sample of international publicly traded firms, this paper studies the rapidly increasing practice of incorporating Environmental, Social, and Governance (ESG) metrics in executive compensation contracts. Our evidence suggests that this compensation practice varies at the country, industry, and firm levels in ways that are consistent with efficient incentive contracting. We also observe that reliance on ESG metrics in executive compensation arrangements is associated with engagement, voting, and trading by institutional investors, which suggests that firms could be adopting this practice to align their management's objectives with the preferences of certain shareholder groups. Finally, we find that the adoption of ESG Pay is accompanied by improvements in key ESG outcomes, but not by improvements in financial performance