Lie to Me: Video-Based Detection of ESG Washing

We examine to what extent CEOs’ ESG commitment presentations reveal deception cues and thus facilitate the detection of ESG washing. Analyzing videos of bank CEOs’ ESG commitment speech made available by the United Nations Principles for Responsible Banking program, we construct deception scores for 32 banks across 19 countries, representing a significant portion of total global bank assets. We find borrowers of banks that have higher deception scores in their commitment videos perform worse on various ESG outcomes including negative ESG incidents, ESG ratings, and emission intensity. The results are robust to controlling for video persuasiveness scores and available bank ESG ratings, and are mainly driven by deception cues in the visual dimension, especially in the eye area, rather than text and audio dimensions. We also find the deception score to be more powerful when bank CEOs experience greater pressure to appear ESG-friendly, are younger, or lack sales experience, consistent with more or stronger deception cues in these situations as suggested by psychology theories. Overall, our evidence indicates the usefulness of video-based deception score in the detection of ESG washing.