The Effect of Sustainability Reporting on the Financial Performance of Basic Materials & Energy Sectors Companies In Indonesia

Abstract

This research examined the effect of sustainability reporting, measured through Environmental, Social, and Governance (ESG) Score, on the financial performance of Basic Materials and Energy sector companies listed on the Indonesia Stock Exchange (IDX) during 2021 to 2025. Financial performance was proxied by Return on Assets (ROA) and Market value (LnMarCap), with firm size, leverage, and board size as control variables. Using quantitative approach with secondary data from Refinitiv LSEG, this research employed panel data regression with the Random Effect method on the sample of 25 companies generating 105 firm-year observations. The results showed that ESG Score had no significant effect on ROA (p = 0.115), while ESG Score had a significant negative effect on Market value (p = 0.019). These findings suggested that, in the Indonesian context, sustainability reporting had not yet generated positive short-term financial value. The challenges carbon-intensive sectors confront in the global energy transition exacerbated investors' perception of ESG expenditures as cost burdens rather than long-term value drivers.