The Role of CSR Report Assurance and ESG Rating in Bank Manager's Judgement on ESG Lending Decisions

ABSTRACT The increasing number of ESG‐linked financial instruments demonstrates the need for reliable information on companies' ESG performance, which is a challenge for users. Debates surround the effects of reliability‐enhancing instruments like corporate social responsibility (CSR) report assurance and environmental, social, and governance (ESG) rating services on decisions related to ESG‐linked financial instruments. Using experimental evidence from 156 bank managers, we show that assurance positively impacts ESG‐linked credit lending decisions, with an additional positive impact when a neutral ESG rating is present in conjunction. When ESG performance and ESG rating improve, reasonable assurance can further amplify this positive effect. Additionally, our research indicates that the implementation of a positive ESG rating positively influences ESG‐linked credit lending decisions, irrespective of any assurance factors. These findings have various implications, as they draw attention to the decision‐making relevance of CSR report assurance and ESG ratings, as well as the understanding of assurance levels.