Intermediary Mechanism Study on the Impact of ESG Assessment on Bond Issuance Interest Rates

Abstract

ESG (Environmental, Social, and Governance) assessment is a widely recognized system for evaluating corporate sustainable development by international investors. The emphasis and improvement of ESG indices can have multiple effects on corporate operations and development. This paper focuses on the impact of ESG on corporate bond financing interest rates, considering the relevant relationships and intermediary mechanisms involved. The results indicate that, with controlled variables considered, corporate bonds with higher ESG scores tend to have lower issuance interest rates. Furthermore, besides the direct impact on bond rates, ESG scores also generate indirect effects through the intermediary variable of financing constraints. The study establishes from a corporate financing perspective that the development of ESG assessment has positive implications for corporate operations and confirms the intermediary role of financing constraints in this causal chain. According to the results, targeted recommendations are proposed for corporate operations: to reduce financing costs, continually optimize ESG and financing constraints.