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Using a sample of bonds issued by publicly listed firms in China over the period 2009–2020, we find a significantly negative relation between corporate ESG engagement (as proxied by ESG rating score) and bond yield spread. We propose and provide evidence that a key channel through which corporate ESG engagement affects bond yield spread is that corporate engagement in ESG activities mitigates the information asymmetry between firms and their outside stakeholders, which lowers the risk perceptions of creditors who thereby request lower returns. Our findings not only add to the existing literature on the economic consequences of corporate ESG engagement and the determinants of corporate bond yield spreads, but also have important implications for firms, credit rating agencies, and policymakers. [ABSTRACT FROM AUTHOR]