Using supervisory data on the loan portfolios of large U.S. banks, we document that these banks specialize by concentrating their lending disproportionately in a few industries. This specialization is consistent with banks having industry‐specific knowledge, reflected in reduced risk of loan defaults, lower aggregate charge‐offs, and higher propensity to lend to opaque firms in the preferred industry. Banks attract high‐quality borrowers by offering generous loan terms in their specialized industry, especially to borrowers with alternative options. Banks focus on their preferred industry in times of instability and relatively lower Tier 1 capital as well as after surges in deposits.

U sing lenders who become members of the Task Force on Climate-Related Financial Disclosures (TCFD) as an exogenous shock, we examine whether and how lenders’ commitment to transparent climate-related disclosures affects borrowers’ environmental performance. We find that borrowers of TCFD-member lenders, relative to control firms, significantly improve their environmental performance after the TCFD launch. Lenders’ disclosure commitments influence borrowers through credit rationing and monitoring. Specifically, polluting borrowers face higher borrowing costs, reduced access to credit, and greater incorporation of environmental action covenants in loan agreements. Additionally, polluting borrowers of TCFD-member lenders experience heightened financial constraints. Finally, borrowers of TCFD-member lenders are more likely to adopt the TCFD framework for climate-related disclosure after the TCFD establishment. Together, these findings illuminate the role of lenders in driving corporate environmental performance improvement through their commitment to transparent climate-related disclosures.