Firms and jurisdictions worldwide are adopting ESG reporting in various forms. To better understand potential implications of ESG reporting, we develop a model in which a firm provides ESG and financial reports to investors. Investors price the firm’s stock, and stock prices provide both real and reporting incentives to management. We characterize how the introduction of ESG reporting affects ESG performance, expected cash flows, and misreporting. ESG reporting tends to encourage corporate ESG, but can discourage ESG when it has significantly negative cash flow implications. For ESG with moderately negative cash flow implications, the firm’s price can suffer from the introduction of ESG reporting. Finally, we use comparative statics to show how changes in investor preferences (e.g., concern for ESG) and ESG efforts’ cash flow implications (e.g., penalties, subsidies, or physical and transition risk) affect market responses to financial and ESG reports, corporate misreporting, and ESG and cash flow outcomes.