ESG SCORE IMPACT ON INDONESIA LISTED FIRMS^ FINANCIAL PERFORMANCE: EVIDENCE FROM SRI KEHATI LISTED FIRMS DURING PRE-PANDEMIC PERIOD
Kevin Bernanda Bethran, Acip Sutardi

Institut Teknologi Bandung

Abstract

ESG, stands for Environmental, Social, and Governance, is a framework used to evaluate sustainability and ethical impact of a business based on its environmental practices, social responsibility, and corporate governance. ESG is getting more awareness especially due to the United Nation agenda in sustainability, but ESG itself is still a topic that constantly develops over time. Now, ESG is seen as one of the factors when evaluating companies performance. Many prior researches have sought to see the relationship between ESG to firms financial performance in many countries. However, the results show contradicting findings. In addition, there has been limited research about ESG in emerging economies countries, including Indonesia. With the uncertainty of prior research results, complexity emerges in understanding ESG impact in these countries. Therefore, this research aims to unfold how ESG has impacted Indonesian firms financial performance, represented by exemplary sustainable companies listed in SRI KEHATI index, prior to the covid pandemic period.

This research uses secondary data, collected through Refinitiv Workspace. Publicly traded firms listed in the SRI KEHATI index with complete ESG and financial data in Refinitiv are selected from 2010 to 2018. However, due to the lag one year concept of the research, data for financial performance are collected during 2011 to 2019 period. The research deployed the Panel Data Regression method with ROA and ROE acting as proxies to financial performance.

The result shows that ESG, collectively and as individual pillars, have no significant impact on SRI KEHATI firms financial performance during the timeline of the research. The result is understandable since Indonesia has just started to put emphasis on sustainability in the financial market in 2017, marked by OJK regulation (no.51/POJK.03/2017) about sustainability reporting, along with some other reasons.

Keywords: ESG- Financial Performance- Sri Kehati

Topic: Financial Management and Accounting