ESG Factors and Financial Performances: Evidence from Listed Company in Indonesia

Muhammad Syahrul Ramadhan (), Maya Sari and Budhi Pamungkas
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Muhammad Syahrul Ramadhan: Universitas Pendidikan Indonesia
Maya Sari: Universitas Pendidikan Indonesia
Budhi Pamungkas: Universitas Pendidikan Indonesia

A chapter in Proceedings of the 9th Global Conference on Business, Management and Entrepreneurship (GCBME 2024), 2025, pp 393-399 from Springer

Abstract: Abstract The Environmental, Social, and Governance (ESG) framework is a comprehensive instrument to assess an organization’s ethical and sustainable impact. Organizations that perform well in all ESG aspects are considered to be in a good position for success across time because they can manage risks effectively and develop lasting relationships with stakeholders. This study aims to assess whether ESG affects financial performance. The ESG score was employed in this research to evaluate ESG implementation, while the Return on Assets indicator was used to determine financial performance concerning profitability. The subject of the study is 61 listed companies in Indonesia that have been included in the ESG–Based Index in 2020-2023. The Panel Data Regression approach is used in this study to analyze the effect of ESG factors on Profitability. According to the fixed effect model, this research indicates that the ESG score positively impacts profitability performance. Businesses that invest in social projects or sustainable practices with a good strategy can see an immediate impact. However, some companies may not see immediate benefits but can experience long-term advantages such as enhanced reputation, reduced risks, and increased efficiency. These factors contribute to improved profitability over time, demonstrating the long-term financial benefits of ESG activities.

Keywords: Environmental; Social; and Governance; Financial Performance; Profitability; Return on Asset; ESG Score (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-817-2_48

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