I study how mandatory disclosure shapes asset managers' framing of the ESG-return link and investors' responses to these ESG narratives. Using hand-collected data on private impact funds, I first establish stylized facts about funds' financial promises before widespread mandatory disclosure: (1) Most impact funds, especially larger ones with more investors, promise at least market returns. (2) Impact funds seeking market returns do meet those targets, but deliver social and environmental impact 75-90% lower than funds accepting below-market financial returns. Next, I exploit the introduction of mandatory sustainable fund disclosure and related enforcement as a shock to the credibility of public funds' ESG narratives. Post-mandate, funds more often pursue sustainability themes for explicit impact than financial purposes alone, ESG metrics become more dispersed across ESG funds and capital reallocates towards impact-focused funds. A randomized field experiment with real-world investors identifies one causal mechanism: absent mandatory disclosure, investors do not trust differences in funds' ESG claims and hence respond only to funds' financial goals. Mandatory disclosure achieves credible separation between funds with varying ESG goals and enables fund differentiation along the ESG-return frontier.

The global adoption of IFRS 9 requires banks to recognize loan loss provisions based on forward-looking credit loss estimates. While these rules increase the timeliness of loss recognition and, thus, the cost of high-risk lending, they also expand the scope for managerial discretion in loss estimation. Using supervisory loan-level data on German banks' internal rating models, we examine how banks respond to these countervailing incentives. Relative to unaffected banks, IFRS 9 adopters update their internal credit risk estimates more frequently but assign more favorable internal ratings to otherwise identical borrowers. A lower precision of these ratings accompanies this pattern, consistent with the strategic use of increased reporting discretion. The implications for bank lending are twofold. First, to counter the increased cost of high-risk lending, banks reduce credit to borrowers most likely to experience internal rating downgrades that would trigger additional provisions in future periods. These effects cluster around seemingly arbitrary provisioning thresholds but also extend broadly across the whole non-investment-grade region, indicating a general shift toward lower credit risk in banks' loan portfolios. Second, the increased bias in loss estimates is associated with higher rollover rates for precisely those loans where expected credit losses are underreported, suggesting that expanded reporting discretion distorts lending in a way that optimizes model input rather than portfolio risk.