Abstract
We consider the effect of the COVID-19 pandemic on deposit flows and prices at bank holding companies in the US. Specifically, we examine whether deposit markets are sensitive to banks’ ESG credentials on the grounds that greater commitment by banks to ESG as evidenced by higher ESG scores is proxy for trust, which is known to dissipate following an exogenous shock. Our empirical evidence shows that depositors used the information embedded in banks’ ESG scores to discipline banks. Following the shock, depositors rewarded high ESG scoring banks with faster growth of noninterest-bearing deposits and willingness to accept lower deposit interest rates.