The Power Of ESG: Logistic Analysis Of Sustainability-Driven Investment Decisions In Emerging Markets
DOI:
https://doi.org/10.62486/agma2025305Keywords:
Sustainability, ESG, Return on Assets, Return on Equity, Debt to Equity Ratio, Company SizeAbstract
Introduction: Sustainability is increasingly becoming a major concern in global investment, especially in the energy sector, which faces intense pressure from stakeholders to improve transparency and accountability. Environmental, Social, and Governance (ESG) has emerged as a strategic indicator that goes beyond traditional financial performance in assessing a company's long-term risk and attractiveness.
Objective: This study aims to analyse the effect of ESG performance on sustainable investment decisions in Indonesian energy companies, considering financial variables as control factors.
Method: This study uses a quantitative approach with logistic regression analysis on 155 observations of energy companies during the period 2019–2023. The main independent variable is the ESG score, while the control variables include Return on Assets (ROA), Return on Equity (ROE), Debt to Equity Ratio (DER), and company size.
Results: The results show that ESG has a positive and significant effect on sustainable investment, as indicated by a high odds ratio value. DER was found to have a significant negative effect, while ROA, ROE, and company size had no significant effect on investment decisions.
Conclusion: These findings confirm that ESG performance is a more decisive strategic factor than traditional financial indicators in attracting long-term investment in the energy sector. This study contributes to the ESG literature in emerging markets and suggests strengthening ESG reporting and green investment policies in Indonesia.
References
Handayati P, Tham YH, Yuningsih Y, Sun Z, Nugroho TR, Rochayatun S. ESG Performance and Corporate Governance—The Moderating Role of the Big Four Auditors [Internet]. Vol. 18, Journal of Risk and Financial Management. 2025. Available from: file:///C:/Users/maya/Downloads/jrfm-18-00031.pdf DOI: https://doi.org/10.3390/jrfm18010031
Bai X, Han J, Ma Y, Zhang W. ESG performance, institutional investors’ preference and financing constraints: Empirical evidence from China. Borsa Istanbul Rev [Internet]. 2022;22:S157–68. Available from: https://doi.org/10.1016/j.bir.2022.11.013 DOI: https://doi.org/10.1016/j.bir.2022.11.013
Ellili NOD. Impact of ESG disclosure and financial reporting quality on investment efficiency. Corp Gov Int J Bus Soc [Internet]. 2022 Jan;22(5):1094–111. Available from: https://doi.org/10.1108/CG-06-2021-0209 DOI: https://doi.org/10.1108/CG-06-2021-0209
Ho L, Nguyen VH, Dang TL. ESG and firm performance: do stakeholder engagement, financial constraints and religiosity matter? J Asian Bus Econ Stud [Internet]. 2024;31(4):263–76. Available from: file:///D:/Data S3/PDD/Artikel/ESG and Firm Performance.pdf DOI: https://doi.org/10.1108/JABES-08-2023-0306
Dorothy P, Endri E. Environmental, social and governance disclosure and firm value in the energy sector: The moderating role of profitability. Probl Perspect Manag. 2024;22(4):588–99. DOI: https://doi.org/10.21511/ppm.22(4).2024.44
Singh K, Jaiwani M. ESG and share price volatility in energy sector firms: does the development phase of countries matter? Int J Energy Sect Manag. 2024;18(5):956–79. DOI: https://doi.org/10.1108/IJESM-05-2023-0033
Sugiarto A, Puspani NN, Fathia F. ESG Leverage towards Stock Performance in Indonesia Stock Exchange. Int J Energy Econ Policy. 2023;13(5):593–606. DOI: https://doi.org/10.32479/ijeep.14384
Aich S, Thakur A, Nanda D, Tripathy S, Kim HC. Factors affecting esg towards impact on investment: A structural approach. Sustain. 2021;13(19):1–14. DOI: https://doi.org/10.3390/su131910868
Budsaratragoon P, Jitmaneeroj B. Corporate sustainability and stock value in asian–pacific emerging markets: Synergies or tradeoffs among esg factors? Sustain. 2021;13(11). DOI: https://doi.org/10.3390/su13116458
Lopez-De-silanes F, McCahery JA, Pudschedl PC. ESG performance and disclosure: A cross-country analysis. Singapore J Leg Stud [Internet]. 2020;2020(December):217–41. Available from: file:///D:/Data S3/PDD/Artikel/finallopez-de-silanesmccaherypudschedl_1.pdf
Kocmanová A, Dočekalová MP, Meluzín T, Škapa S. Sustainable investing model for decision makers (Based on research of manufacturing industry in the Czech Republic). Sustain [Internet]. 2020;12(20):1–27. Available from: file:///C:/Users/maya/AppData/Local/Mendeley Ltd./Mendeley Desktop/Downloaded/Kocmanová et al. - 2020 - Sustainable investing model for decision makers (Based on research of manufacturing industry in the Czech Repu.pdf DOI: https://doi.org/10.3390/su12208342
Syarkani Y, Subu MA, Waluyo I. Impact of ESG Performance on Firm Value: A Comparison of Emerging and Developed Markets. Commer J Bus Manag [Internet]. 2024;2(4):204–19. Available from: http://dx.doi.org/10.61978/commercium.v2i4.367 DOI: https://doi.org/10.61978/commercium.v2i4.367
Nandan MSPK, Sinku DS. The ESG Evolution: Bridging the Gap Between Global Standards and Local Realities in Emerging Markets. Nanotechnol Perceptions [Internet]. 2024;137–53. Available from: http://dx.doi.org/10.62441/nano-ntp.vi.3623 DOI: https://doi.org/10.62441/nano-ntp.vi.3623
Wahyuni PD, Syamsuddin MM. Epistemological Foundation of ESG-Based Investment in Indonesia’s Econ omic Policy. Int J Econ Manag Sci [Internet]. 2024;1(4):388–400. Available from: http://dx.doi.org/10.61132/ijems.v1i4.371 DOI: https://doi.org/10.61132/ijems.v1i4.371
Lestari PA, Gangodawilage D. Sustainability Accounting and the Future of ESG Reporting: Investor In sights. Sinergi Int J Account Tax [Internet]. 2025;3(1):67–78. Available from: http://dx.doi.org/10.61194/ijat.v3i1.488 DOI: https://doi.org/10.61194/ijat.v3i1.488
Kossay M, Putra RK, Idris MF. Keberlanjutan Ekonomi dalam Perspektif Hukum: Analisis Regulasi Enviro nmental, Social, and Governance di Indonesia. Perkara J Ilmu Huk dan Polit [Internet]. 2025;3(1):675–93. Available from: http://dx.doi.org/10.51903/perkara.v3i1.2355 DOI: https://doi.org/10.51903/perkara.v3i1.2355
Meng T, Dato Haji Yahya MH, Ashhari ZM, Yu D. ESG performance, investor attention, and company reputation: Threshold model analysis based on panel data from listed companies in China. Heliyon [Internet]. 2023;9(10):e20974–e20974. Available from: https://doi.org/10.1016/j.heliyon.2023.e20974 DOI: https://doi.org/10.1016/j.heliyon.2023.e20974
Yazid H, Ismail T, Uzliawati L, Taqi M, Muchlish M, Kalbuana N. The Effect Of Profitability, Corporate Social Responsibility, Corporate Governance Mechanisms, And Firm Size On Debt Policy. Financ Credit Act Probl Theory Pract. 2024;6(59):446–59. DOI: https://doi.org/10.55643/fcaptp.6.59.2024.4536
Kalbuana N, Taqi M, Uzliawati L, Ramdhani D. The Effect of Profitability, Board Size, Woman on Boards, and Political Connection on Financial Distress Conditions. Cogent Bus Manag [Internet]. 2022;9(1). Available from: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85142247307&doi=10.1080%2F23311975.2022.2142997&partnerID=40&md5=1f721db0b7cf08a0e75c6369fe6eafcb
Kalbuana N, Kusiyah K, Supriatiningsih S, Budiharjo R, Budyastuti T, Rusdiyanto R. Effect of profitability, audit committee, company size, activity, and board of directors on sustainability. Cogent Bus Manag. 2022 Dec;9(1):2129354. DOI: https://doi.org/10.1080/23311975.2022.2129354
Kalbuana N, Taqi M, Uzliawati L, Ramdhani D. CEO narcissism, corporate governance, financial distress, and company size on corporate tax avoidance. Cogent Bus Manag [Internet]. 2023;10(1). Available from: https://doi.org/10.1080/23311975.2023.2167550 DOI: https://doi.org/10.1080/23311975.2023.2167550
Loang OK. The Road to Sustainable Investing: Corporate Governance, Sustainable Development Goals, and the Financial Market. Institutions Econ [Internet]. 2023;15(3):33–57. Available from: file:///C:/Users/maya/AppData/Local/Mendeley Ltd./Mendeley Desktop/Downloaded/Loang - 2023 - The Road to Sustainable Investing Corporate Governance, Sustainable Development Goals, and the Financial Market.pdf DOI: https://doi.org/10.22452/IJIE.vol15no3.2
Fometescu A, Hategan CD, Pitorac RI. How Responsible Are Energy and Utilities Companies in Terms of Sustainability and Economic Development? Vol. 17, Energies. 2024. DOI: https://doi.org/10.3390/en17236209
Veeravel V, Murugesan VP, Narayanamurthy V. Does ESG disclosure really influence the firm performance? Evidence from India. Q Rev Econ Financ [Internet]. 2024;95:193–202. Available from: https://doi.org/10.1016/j.qref.2024.03.008 DOI: https://doi.org/10.1016/j.qref.2024.03.008
Xu S. The Impact of ESG Performance of Energy Enterprises on Stock Value. Adv Econ Manag Polit Sci [Internet]. 2024;74(1):122–8. Available from: file:///C:/Users/maya/Downloads/071447275ea2415fbf19335eb016f98d.marked_oDAN7HK.pdf
Fatemi A, Glaum M, Kaiser S. ESG performance and firm value: The moderating role of disclosure. Glob Financ J [Internet]. 2018;38:45–64. Available from: https://www.sciencedirect.com/science/article/pii/S1044028316300680 DOI: https://doi.org/10.1016/j.gfj.2017.03.001
Al Amosh H, Khatib SFA, Alkurdi A, Bazhair AH. Capital structure decisions and environmental, social and governance p erformance: insights from Jordan. J Financ Report Account [Internet]. 2022;22(4):972–89. Available from: http://dx.doi.org/10.1108/jfra-12-2021-0453 DOI: https://doi.org/10.1108/JFRA-12-2021-0453
Adeneye YB, Kammoun I, Ab Wahab SNA. Capital structure and speed of adjustment: the impact of environmental , social and governance (ESG) performance. Sustain Accounting, Manag Policy J [Internet]. 2022;14(5):945–77. Available from: http://dx.doi.org/10.1108/sampj-01-2022-0060 DOI: https://doi.org/10.1108/SAMPJ-01-2022-0060
Alves CF, Meneses LL. ESG scores and debt costs: Exploring indebtedness, agency costs, and f inancial system impact. Int Rev Financ Anal [Internet]. 2024;94:103240. Available from: http://dx.doi.org/10.1016/j.irfa.2024.103240 DOI: https://doi.org/10.1016/j.irfa.2024.103240
Yu Z, Farooq U, Alam MM, Dai J. How does environmental, social, and governance (ESG) performance deter mine investment mix? New empirical evidence from BRICS. Borsa Istanbul Rev [Internet]. 2024;24(3):520–9. Available from: http://dx.doi.org/10.1016/j.bir.2024.02.007 DOI: https://doi.org/10.1016/j.bir.2024.02.007
Bissoondoyal-Bheenick E, Brooks R, Do HX. ESG and firm performance: The role of size and media channels. Econ Model [Internet]. 2023;121:106203. Available from: http://dx.doi.org/10.1016/j.econmod.2023.106203 DOI: https://doi.org/10.1016/j.econmod.2023.106203
Dobrick J, Klein C, Zwergel B. Size bias in refinitiv ESG data. Financ Res Lett [Internet]. 2023;55:104014. Available from: http://dx.doi.org/10.1016/j.frl.2023.104014 DOI: https://doi.org/10.1016/j.frl.2023.104014
Abdi Y, Li X, Càmara-Turull X. Exploring the impact of sustainability (ESG) disclosure on firm value and financial performance (FP) in airline industry: the moderating rol e of size and age. Environ Dev Sustain [Internet]. 2021;24(4):5052–79. Available from: http://dx.doi.org/10.1007/s10668-021-01649-w DOI: https://doi.org/10.1007/s10668-021-01649-w
Cristea M, Noja GG, Thalassinos E, Cîrciumaru D, Ponea C Ștefan, Durău CC. Environmental, Social and Governance Credentials of Agricultural Compa nies—The Interplay with Company Size. Resources [Internet]. 2022;11(3):30. Available from: http://dx.doi.org/10.3390/resources11030030 DOI: https://doi.org/10.3390/resources11030030
Aydoğmuş M, Gülay G, Ergun K. Impact of ESG performance on firm value and profitability. Borsa Istanbul Rev [Internet]. 2022;22:S119–27. Available from: http://dx.doi.org/10.1016/j.bir.2022.11.006 DOI: https://doi.org/10.1016/j.bir.2022.11.006
Rastogi S, Singh K, Kanoujiya J. Firm’s value and ESG: the moderating role of ownership concentration a nd corporate disclosures. Asian Rev Account [Internet]. 2023;32(1):70–90. Available from: http://dx.doi.org/10.1108/ara-10-2022-0266 DOI: https://doi.org/10.1108/ARA-10-2022-0266
Rau PR, Yu T. A survey on ESG: investors, institutions and firms. China Financ Rev Int [Internet]. 2023;14(1):3–33. Available from: http://dx.doi.org/10.1108/cfri-12-2022-0260 DOI: https://doi.org/10.1108/CFRI-12-2022-0260
Al Azizah US, Haron R. The sustainability imperative: evaluating the effect of ESG on corporate financial performance before and after the pandemic. Discov Sustain. 2025;6(1). DOI: https://doi.org/10.1007/s43621-025-01401-8
Xue R, Wang H, Yang Y, Linnenluecke MK, Jin K, Cai CW. The adverse impact of corporate ESG controversies on sustainable investment. J Clean Prod. 2023;427:139237. DOI: https://doi.org/10.1016/j.jclepro.2023.139237
Chams N, García-Blandón J. Sustainable or not sustainable? The role of the board of directors. J Clean Prod. 2019;226:1067–81. DOI: https://doi.org/10.1016/j.jclepro.2019.04.118
Li Q, Tang W, Li Z. ESG systems and financial performance in industries with significant environmental impact: a comprehensive analysis. Front Sustain. 2024;5. DOI: https://doi.org/10.3389/frsus.2024.1454822
Cardillo MA dos R, Basso LFC. Revisiting knowledge on ESG/CSR and financial performance: A bibliometric and systematic review of moderating variables. J Innov Knowl [Internet]. 2025;10(1). Available from: file:///D:/Data S3/PDD/Artikel/Discussion/Revisiting knowledge on ESG_CSR and financial performance_ A bibliometric and systematic review of moderating variables.pdf DOI: https://doi.org/10.1016/j.jik.2024.100648
Al Frijat Y, Altawalbeh M, Al-Hajaia M. The role of environmental sustainability as a mediator in the relationship between green accounting and corporate performance in Jordan. Probl Perspect Manag [Internet]. 2025;23(2):236–51. Available from: https://doi.org/10.21511/ppm.23(2).2025.16 DOI: https://doi.org/10.21511/ppm.23(2).2025.16
Al-Shaer H, Zaman M. Board gender diversity and sustainability reporting quality. J Contemp Account Econ [Internet]. 2016;12(3):210–22. Available from: file:///D:/Data S3/PDD/Artikel/Discussion/Board_Gender_Diversity_and_Sustainability_Reporting_Quality20190911-80796-1aieg9w-libre.pdf DOI: https://doi.org/10.1016/j.jcae.2016.09.001
Nareswari N, Tarczynska-Luniewska M, Al Hashfi RU. Analysis of Environmental, Social, and Governance Performance in Indonesia: Role of ESG on Corporate Performance. Procedia Comput Sci [Internet]. 2023;225:1748–56. Available from: https://doi.org/10.1016/j.procs.2023.10.164 DOI: https://doi.org/10.1016/j.procs.2023.10.164
Nasta L, Magnanelli BS, Ciaburri M. From profits to purpose: ESG practices, CEO compensation and institutional ownership. Manag Decis [Internet]. 2024;62(13):93–115. Available from: file:///C:/Users/maya/AppData/Local/Mendeley Ltd./Mendeley Desktop/Downloaded/Nasta, Magnanelli, Ciaburri - 2024 - From profits to purpose ESG practices, CEO compensation and institutional ownership.pdf DOI: https://doi.org/10.1108/MD-06-2023-0932
Gerged AM, Matthews L, Elheddad M. Mandatory disclosure, greenhouse gas emissions and the cost of equity capital: UK evidence of a U-shaped relationship [Internet]. Vol. 30, Business Strategy and the Environment. 2021. 908–930 p. Available from: file:///D:/Data S3/PDD/Artikel/Discussion/Mandatory disclosure, greenhouse gas emissions and the cost of equity capital_ UK evidence of a U‐shaped relationship.pdf DOI: https://doi.org/10.1002/bse.2661
Narula R, Rao P, Kumar S, Matta R. ESG scores and firm performance- evidence from emerging market. Int Rev Econ Financ [Internet]. 2024;89:1170–84. Available from: https://www.sciencedirect.com/science/article/pii/S1059056023003441 DOI: https://doi.org/10.1016/j.iref.2023.08.024
Doni F, Corvino A, Bianchi Martini S. Corporate governance model, stakeholder engagement and social issues evidence from European oil and gas industry. Soc Responsib J [Internet]. 2022;18(3):636–62. Available from: file:///C:/Users/maya/AppData/Local/Mendeley Ltd./Mendeley Desktop/Downloaded/Doni, Corvino, Bianchi Martini - 2022 - Corporate governance model, stakeholder engagement and social issues evidence from European oil.pdf DOI: https://doi.org/10.1108/SRJ-08-2020-0336
Jin X, Qi H, Huang X. Green financial regulation and corporate strategic ESG behavior: Evidence from China. Financ Res Lett [Internet]. 2024;65(May). Available from: file:///D:/Data S3/PDD/Artikel/Discussion/Green financial regulation and corporate strategic ESG behavior_ Evidence from China.pdf DOI: https://doi.org/10.1016/j.frl.2024.105581
Friede G, Busch T, Bassen A. ESG and financial performance: aggregated evidence from more than 2000 empirical studies. J Sustain Financ Invest. 2015;5(4):210–33. DOI: https://doi.org/10.1080/20430795.2015.1118917
Sulaiman N, Halid S, Isa NSM, Omar N, Rahman RA. Financial Performance as a Driver of ESG Disclosure: Evidence from Malaysia. Int J Res Innov Soc Sci [Internet]. 2025;9(1):3527–34. Available from: https://econpapers.repec.org/RePEc:bcp:journl:v:9:y:2025:i:1:p:3527-3534 DOI: https://doi.org/10.47772/IJRISS.2025.9010281
Wang Z, Sarkis J. Corporate social responsibility governance, outcomes, and financial performance. J Clean Prod [Internet]. 2017;162:1607–16. Available from: https://www.sciencedirect.com/science/article/pii/S0959652617313112 DOI: https://doi.org/10.1016/j.jclepro.2017.06.142
Chen YC, Hung M, Wang Y. The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China. J Account Econ [Internet]. 2018;65(1):169–90. Available from: https://www.sciencedirect.com/science/article/pii/S0165410117300757 DOI: https://doi.org/10.1016/j.jacceco.2017.11.009
Drempetic S, Klein C, Zwergel B. The influence of firm size on the ESG score: corporate sustainability ratings under review. J Bus Ethics [Internet]. 2020;167(2):333–60. Available from: https://doi.org/10.1007/s10551-019-04164-1 DOI: https://doi.org/10.1007/s10551-019-04164-1
Bani-Khaled S, Azevedo G, Oliveira J. Environmental, social, and governance (ESG) factors and firm value: A systematic literature review of theories and empirical evidence. AMS Rev [Internet]. 2025; Available from: https://doi.org/10.1007/s13162-025-00303-2 DOI: https://doi.org/10.1007/s13162-025-00303-2
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Hermaya Ompusunggu, Helmi Yazid, Lia Uzliawati, Imam Abu Hanifah (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
The article is distributed under the Creative Commons Attribution 4.0 License. Unless otherwise stated, associated published material is distributed under the same licence.
