In a first of its kind study, we examine whether a municipal’s disclosure of Environmental, Social, and Governance (ESG) initiatives in their Annual Comprehensive Financial Reports (ACFR) has a positive impact in the municipal bond market. In particular, we investigate the “Environmental and Social” aspect of ESG reporting via support of Urban Agriculture (UA) related to community gardens. Motivation for this study comes from a significant gap in the accounting literature dedicated to the business impacts of municipal sustainability efforts. To address our research question, we collect and analyze general obligation (GO) bond issue reports and ACFRs in New England. We find that disclosing support of community garden initiatives in the ACFR is negatively associated with GO bond interest costs. While the magnitude of the association is relatively small, the relationship suggests the governmental debt market may be incorporating this (new type of) non-quantifiable information in investment judgments and decisions.
