We find that long‐term institutional investors tilt their portfolios toward firms with better Environmental, Social, and Governance (ESG) profiles, in the cross sections of both institutional investor portfolios and the ownership of firms. We test whether several theoretically motivated mechanisms can explain this relationship. Our results that long‐term investors exhibit patience with firms around poor earnings announcements, but quickly sell portfolio firms after negative ES incidents, support the view that long‐ and short‐term investors evaluate information differently. Our evidence shows that limits‐to‐arbitrage play a role, as we find that investors' ESG tilt weakens following regulatory shocks that shorten their horizon

By analyzing a sample of US and European listed banks over the years 2015–2022, we investigate the relationship between greenwashing behavior and systemic risk. We use a measure of greenwashing that considers the consistency of what banks disclose with what they actually do to address ESG-related issues. We find that engaging in greenwashing practices contributes to undermining financial stability, with a rise in systemic risk which is exacerbated for less efficient and larger banks. Market seems to acknowledge a superior informative value to banks’ actual ESG performance, giving less importance to what they disclose. Finally, a better performance in each of the environmental, social and governance dimensions reduces systemic risk, but only a bank’s commitment in addressing environment-related issues seems to moderate the contribution of greenwashing to financial system fragility

This study analyzes the evolution of climate-risk discourse in banking using 4,887 news articles (2008–2024) collected from ProQuest. We apply Natural Language Processing and add two novel layers: (i) an event-alignment analysis that links coverage dynamics to dated policy and supervisory milestones, and (ii) a discourse-network analysis connecting banks and regulators. We document a marked post-2020 shift, with ESG emerging as the dominant framing (7,860 mentions) alongside persistent geographic asymmetries (U.S.-led coverage) and uneven sectoral engagement (Risk Management highest salience; Fintech lowest). Sentiment skews positive (≈4,000 positive vs. ≈1,500 negative), and topic modeling identifies eight stable thematic clusters spanning operations, ratings, ESG assessment, disclosures, and market instruments. Event alignment shows media attention is typically anticipatory (median peak two months before an anchor), with COP26 producing a sustained level shift (+100% within a ±6-month window) and the Bank of England’s CBES results generating the largest single spike (210 articles), whereas some 2022 rule-making announcements (e.g., SEC climate-disclosure proposal) exhibit sharper but less durable attention. The discourse network centers on two regulatory hubs (the Federal Reserve and the ECB) with key banks (e.g., Citigroup, JPMorgan, UBS) bridging into supervisory narratives. Collectively, the findings show climate risk becoming embedded in core banking practice while revealing structural, regional, and functional asymmetries that matter for policy design and implementation. • Provides the first longitudinal NLP-based analysis of climate risk discourse in the banking sector • Reveals how climate risk integration in banking has evolved across regulatory, operational, and market dimensions • Identifies distinct thematic domains shaping climate risk narratives in banking over time • Shows that climate risk discourse is predominantly anticipatory around major policy and supervisory milestones • Maps the institutional structure of climate risk governance by linking banks and regulators within a discourse network

How do banks contribute to the green economy? Using a unique dataset detailing firms' revenue exposure to green business activities, we present new evidence that firms generating revenue from green products and services are associated with lower syndicated loan spreads. We find that the green revenue effects on loan spreads are attributable to firms' prospects tied to climate change-related opportunities and banks' environmental orientation. Foreign banks subject to mandatory environmental, social, and governance (ESG) disclosure regulations reduce the loan spreads to green revenue firms. We also find suggestive evidence that firms with green revenue tend to file more green patents following loan origination. While banks typically perceive green innovation as riskier and demand higher loan spreads, this effect is offset if a firm also generates green revenue. Collectively, our results highlight the pivotal role that banks play in channeling financial resources toward green business practices

We examine the effect of private equity buyouts on the environmental performance of U.S. fossil fuel power plants. Output-scaled CO 2 emissions are, on average, 4.2% lower after buyouts, predominantly because of fuel-saving improvements in production efficiency. Emission intensities decline more significantly following buyouts backed by pro-ESG private equity because of not only greater efficiency gains but also enhanced emission control. Our results suggest that while private equity firms are effective at implementing environmentally beneficial operational changes that also increase profitability, they do not have strong incentives to undertake environmentally beneficial changes that are privately costly, except for those with pro-ESG preferences

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We show that U.S. firms cut imports by 31.8% when their international suppliers experience environmental and social (E&S) incidents. These trade cuts are larger for publicly listed U.S. importers facing high E&S investor pressure and lead to cross-country supplier reallocation, suggesting that E&S preferences in capital markets can be privately costly but have real effects for foreign suppliers. Larger trade cuts around the incident result in better supplier E&S performance in subsequent years and in the eventual resumption of trade. Our results highlight the role of investors in ensuring suppliers’ E&S compliance along global supply chains.