THE IMPACT OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) TOWARDS CORPORATE FINANCIAL PERFORMANCE IN THE ENERGY SECTOR

• Main Author: Ezza Sadewa, Fa'iq
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/73515
• Institution: Institut Teknologi Bandung

This study aims to understand the relationship between corporate sustainability (ESG) and corporate financial performance of companies in the energy sector. In total, there are 138 companies in energy sector from 30 countries observed. The author used ESG performance score, Environmental performance score, Social performance score, and Governance performance score as the independent variables. The dependent variables are ROA, ROE, and Tobin’s Q. There are three control variables, which are firms’ size, firms’ leverage, and GDP growth. For data analysis, the author utilized panel data regression by using Stata and Rstudio to reach the conclusion of this study. The author generated 12 models. Among those models, corporate sustainability indicators are significant in 8 models. However, the findings show a mixed relationship of corporate sustainability impact on corporate financial performance. There is a robust finding that ESG performance score, Environmental performance score, Social performance score, and Governance performance score are significant and positively correlated with the financial performances, which are ROA and ROE. Meanwhile, the result of the data analysis in Tobin’s Q shows that ESG performance score, Environmental performance score, Social performance score, and Governance performance score are either insignificant or negatively correlated with the financial performances. However, despite the mixed result, The findings indicate a strong tendency to accept the hypothesis that corporate sustainability have a positive impact on the financial performance of companies in the energy sector.