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ABSTRACT Over the past few decades, awareness of climate change has grown significantly, leading to increased pressure on companies to address carbon emissions. ESG ratings are a widely used metric to evaluate a company's commitment to sustainable development and carbon emission reduction. This paper examines the nexus between ESG disclosure and corporate carbon emissions, with particular emphasis on the moderating role of financial leverage. The analysis draws on a panel dataset of publicly listed firms in the United States over the period 2010–2023. Using OLS estimates and a two‐step system generalized method of moments (GMM) approach, the results reveal a positive association between ESG disclosure and carbon‐emissions performance. However, the findings also show that financial leverage weakens this relationship. Firms with higher debt levels demonstrate a diminished ability to translate ESG disclosure into effective emission–reduction outcomes. Overall, the study offers important insights for policymakers seeking to promote corporate engagement in emission‐reduction efforts.
Assidi et al. (Tue,) studied this question.