Do environmental, social, and governance (ESG) scores accurately represent corporate responsibility? Wei Wang finds that banks with higher ESG scores grant fewer home mortgage loans in low-income areas.

Mortgage loans are widely regarded as important to low-income communities’ securing housing and wealth. Wang suggests that some banks are using ESG narratives to appear more socially responsible while not actually lending to disadvantaged communities, a phenomenon the author refers to as “social wash.” Stakeholders looking for socially responsible banks should not take ESG scores at face value.