We document the existence of a statistically and economically significant ESG premium, i.e. better rated companies access debt at a lower cost. Despite some differences across rating agencies, this result is robust to the inclusion of issuer’s credit standing as well as several bond and firms’ characteristics. We find that the effect is mainly driven by firms domiciled in advanced economies whereas creditworthiness considerations prevail for firms in emerging markets. Lastly, we show that the lower cost of capital for highly rated ESG firms is explained by both investors’ preference towards more sustainable assets and by risk-based considerations unrelated to firms’ creditworthiness.