ANALYSIS OF THE INFLUENCE OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE PILLARS ON THE PROFITABILITY OF MINING COMPANIES IN INDONESIA

• Main Author: Ibrena Ginting, Febi
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/85451
• Institution: Institut Teknologi Bandung

The mining industry is a sector sensitive to environmental and social issues, making ESG (Environmental, Social, and Governance) a primary focus for all stakeholders and a critical consideration in investment decisions. This study analyzes the impact of the Environmental, Social, and Governance pillars on the profitability (Return on Assets) of mining companies in Indonesia. ESG pillar scores and profitability data (Return on Assets) over 8 years (2015-2022) from 7 mineral and coal mining companies were obtained from Bloomberg and company financial reports and were analyzed using linear regression methods. This study also considers company size and leverage as control variables. The results show that of the three ESG pillars, only the Environmental pillar has a significant impact on ROA, both in simultaneous and univariate analyses. The Social and Governance pillars do not show a significant influence on company profitability. This finding indicates that mining companies with good environmental management systems tend to have higher profitability, in line with the global trend emphasizing sustainability in investments. This study provides important implications for investors in considering ESG aspects, particularly environmental factors, as key considerations in making investment decisions in mining companies.