This study supports ESG lending in helping mitigate information asymmetries in traditional debt and improving corporate disclosure. It examines two crucial channels through which ESG lending can influence corporate disclosure: the external mechanism driven by environmentally conscious institutional investors and the internal mechanism arising from board composition independence and diversification. Furthermore, we conducted a robustness test using conference call data, and the results further suggest that the issuance of ESG lending drives firms to make more voluntary disclosures. Additionally, our study highlights that companies obtaining ESG lending experience several benefits, including improved ESG ratings, reductions in carbon emissions under Scope 1, enhanced stock liquidity, and higher ESG disclosure score. Our findings also suggest that ESG lending not only improves corporate disclosure, but also plays a critical role in promoting sustainable business operations.
