We analyze how borrowers’ capital structure affects their incentives to integrate ESG. Borrowers may undertake socially valuable but financially underperforming projects when doing so lowers expected repayments to outside investors. This repayment saving is larger under more repayment-sensitive securities—such as equity-like contracts—whose payoffs vary more strongly with project cash flows. Yet investor competition endogenously reduces sensitivity, undermining incentives to integrate ESG. Financially motivated borrowers therefore prefer debt, a possible explanation for the growth of green bonds. Under asymmetric information, ESG-oriented borrowers can credibly signal commitment by issuing equity when some investors are non-consequentialists who derive utility from directly financing green investment and accept lower financial returns.