Abstract
<p>This study was conducted to analyze the effect of environmental, social, and governance (environmental, social, and governance (ESG) performance on the company's financial performance. The company's financial performance is proxied by using Return On Assets. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange in the 2015-2019 period. The sampling technique used purposive sampling to obtain a total of 13 manufacturing companies whose annual reports were published on idx.co.id and disclosed environmental, social, and governance scores on Bloomberg. The analytical method used is panel data regression using the E-views 9 program. The results of this study indicate that social performance, governance performance and ESG performance have a positive and significant effect on the company's financial performance while environmental performance has a negative and insignificant effect on the company's financial performance.</p><p><strong>Keywords:</strong> Environmental Performance, Social Performance, Governance Performance, ESG Performance, Financial Performance.</p>
Highlights
Maintaining the long-term sustainability of the company by adhering to the guidelines for corporate governance is the key to increasing the company's value which is increasingly optimal for all company stakeholders
The results of this study indicate that the direction of the coefficie nt is negative, indicating that environmental performance can have an unfavorable effect on the company's financial performance which is proxyed by Return on Assets (ROA)
Results of testing for all hypotheses are given as follow: 1. Testing on Hypothesis 1 shows that environmental performance has a negative and insignificant effect on the company's financial performance
Summary
Maintaining the long-term sustainability of the company by adhering to the guidelines for corporate governance is the key to increasing the company's value which is increasingly optimal for all company stakeholders. Corporate Social Responsibility (CSR) as the main element of company stakeholder management is required to report the disclosure of information on sustainability reports on environmental, social, and governance (ESG) issues Velte (2019). Based on the results of the Globescan survey and the Global Reporting Initiative (GRI) regarding the level of public trust in the disclosure of information in the 2020 sustainability report, it showed a significant increase reaching an average of 51%. This result increased sharply when compared to the same survey result in 2003 which was 30%. Of the 27 countries surveyed, the highest level of public trust in Indonesia reached 81% as well as being the first to beat China's position, which previously stood at 80% to 73%
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