The Influence of Environment, Social & Governance (ESG) Values on Financial Performance: The Role of Leverage as Moderation

Abstract

This study examines the effect of Environmental, Social, and Governance (ESG) performance on corporate financial performance with leverage as a moderating variable, using data from non-financial companies listed on the Indonesia Stock Exchange for the period 2019–2022. The ESG index used is the measurement result from the Bumi Global Karbon Foundation (BGK), which adopts international standards while adjusting the Indonesian context. The analytical methods applied are multiple linear regression and Moderated Regression Analysis (MRA) to test the relationship and moderating role of leverage on Return on Assets (ROA). The results of the study show that Governance performance has a positive and significant effect on profitability, while Environmental performance shows a positive trend that is not yet significant and Social performance has a negative effect on Financial Performance. The moderation findings reveal that Leverage weakens the positive impact of Environmental performance, but strengthens the relationship between Social and Governance performance on corporate profitability. These results emphasize the importance of capital structure management in supporting the implementation of an effective sustainability strategy to achieve optimal financial performance.