Influence of GHG emissions intensity and ESG scores on the financial performance of publicly listed companies in the ASEAN Region
DOI:
https://doi.org/10.61511/crsusf.v2i1.1816Keywords:
ASEAN, ESG score, GHG emissions intensity, return on asset, Tobin’s QAbstract
Background: Sustainability and environmental responsibility have become critical concerns in corporate governance, with GHG emissions intensity and ESG scores increasingly used as indicators of responsible business practices. However, their impact on financial performance remains a subject of debate, especially in ASEAN markets, where regulatory frameworks and investor priorities differ. This study aims to analyze the relationship between GHG semissions intensity, ESG scores, and financial performance (ROA and Tobin’s Q) in ASEAN public companies to assess how these sustainability metrics influence corporate success. Methods: The study employs fixed-effects panel regression analysis using data from Refinitiv Eikon on 220 ASEAN public companies from 2018 to 2022. The key variables include GHG emissions intensity and ESG scores as independent variables, with ROA and Tobin’s Q as dependent variables. Findings: The findings indicate that GHG emissions intensity has a slightly significant impact on ROA but does not significantly affect Tobin’s Q, suggesting that investors in ASEAN may not prioritize emissions data when evaluating corporate performance. This supports the notion that carbon emissions' financial impact varies by industry, and inconsistent regulations across ASEAN complicate emissions comparisons. In contrast, ESG scores exhibit a significant negative relationship with both ROA and Tobin’s Q, implying that while investors recognize ESG engagement as a governance signal, high implementation costs and delayed returns deter investment. Additionally, risks such as greenwashing and inconsistent ESG reporting standards further undermine the credibility of ESG metrics in ASEAN markets. Conclusion: While GHG emissions intensity shows minimal influence on profitability, ESG engagement, despite its long-term benefits, presents short-term financial challenges. The findings underscore the importance of aligning ESG efforts with corporate strategy and standardizing ESG reporting frameworks across ASEAN to enhance investor confidence. Novelty/Originality of this article: This study contributes to the ongoing discourse on sustainability and corporate performance by specifically examining ASEAN markets, which have diverse regulatory environments and investor behaviors.
References
Ademi, B., & Klungseth, N. J. (2022). Does it pay to deliver superior ESG performance? Evidence from US S&P 500 companies. Journal of global responsibility, 13(4), 421-449. http://dx.doi.org/10.1108/JGR-01-2022-0006
Alareeni, B. A., & Hamdan, A. (2020). ESG impact on performance of US S&P 500-listed firms. Corporate Governance: The International Journal of Business in Society, 20(7), 1409-1428. https://doi.org/10.1108/CG-06-2020-0258
Alessa, N., Akparep, J. Y., Sulemana, I., & Agyemang, A. O. (2024). Does stakeholder pressure influence firms environmental, social and governance (ESG) disclosure? Evidence from Ghana. Cogent Business & Management, 11(1), 2303790. https://doi.org/10.1080/23311975.2024.2303790
Alves, C. F., & Meneses, L. L. (2024). ESG scores and debt costs: Exploring indebtedness, agency costs, and financial system impact. International Review of Financial Analysis, 94, 103240. http://dx.doi.org/10.1016/j.irfa.2024.103240
Arvidsson, S. (2014). Corporate social responsibility and stock market actors: A comprehensive study. Social Responsibility Journal, 10(2), 210-225. http://dx.doi.org/10.1108/SRJ-08-2012-0099
ASEAN CSR Network (ACN) Organization. (2018). Sustainability Reporting in ASEAN Countries Indonesia, Malaysia, Philippines, Singapore, and Thailand. ASEAN CSR Network. Retrieved from https://www.asean-csr-network.org/c/component/content/article?id=1294:sustainability-reporting-in-asean-countries-november-2018&Itemid=55
Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22, S119-S127. http://dx.doi.org/10.1016/j.bir.2022.11.006
Bae, K. H., El Ghoul, S., Gong, Z. J., & Guedhami, O. (2021). Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic. Journal of Corporate Finance, 67, 101876. https://doi.org/10.1016/j.jcorpfin.2020.101876
Bhaskaran, R. K., Ting, I. W. K., Sukumaran, S. K., & Sumod, S. D. (2020). Environmental, social and governance initiatives and wealth creation for firms: An empirical examination. Managerial and Decision Economics, 41(5), 710-729. https://doi.org/10.1002/mde.3131
Boulhaga, M., Bouri, A., Elamer, A. A., & Ibrahim, B. A. (2023). Environmental, social and governance ratings and firm performance: The moderating role of internal control quality. Corporate Social Responsibility and Environmental Management, 30(1), 134-145. https://doi.org/10.1002/csr.2343
Buallay, A. (2019). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality: An International Journal, 30(1), 98-115. http://dx.doi.org/10.1108/MEQ-12-2017-0149
Chen, F., Liu, A., Lu, X., Zhe, R., Tong, J., & Akram, R. (2022). Evaluation of the effects of urbanization on carbon emissions: The transformative role of government effectiveness. Frontiers in Energy Research, 10, 848800. https://doi.org/10.3389/fenrg.2022.848800
Chen, Z., & Xie, G. (2022). ESG disclosure and financial performance: Moderating role of ESG investors. International Review of Financial Analysis, 83, 102291. https://doi.org/10.1016/j.irfa.2022.102291
Chininga, E., Alhassan, A. L., & Zeka, B. (2023). ESG ratings and corporate financial performance in South Africa. Journal of Accounting in Emerging Economies, 14(3), 692-713. http://dx.doi.org/10.1108/JAEE-03-2023-0072
Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015). Dynamics of environmental and financial performance: The case of greenhouse gas emissions. Organization & Environment, 28(4), 374-393. https://doi.org/10.1177/1086026615620238
Deng, X., & Cheng, X. (2019). Can ESG indices improve the enterprises’ stock market performance?—An empirical study from China. Sustainability, 11(17), 4765. https://doi.org/10.3390/su11174765
Dkhili, H. (2023). Does environmental, social and governance (ESG) affect market performance? The moderating role of competitive advantage. Competitiveness Review: An International Business Journal, 34(2), 327-352. https://doi.org/10.1108/CR-10-2022-0149
Engelhardt, N., Ekkenga, J., & Posch, P. (2021). ESG ratings and stock performance during the COVID-19 crisis. Sustainability, 13(13), 7133. http://dx.doi.org/10.3390/su13137133
Fauzi, H., Mahoney, L. S., & Abdul Rahman, A. (2007). The link between corporate social performance and financial performance: evidence from Indonesian companies. Issues in Social and Environmental Accounting, 1(1), 149-159. http://dx.doi.org/10.22164/isea.v1i1.12
Galama, J. T., & Scholtens, B. (2021). A meta-analysis of the relationship between companies’ greenhouse gas emissions and financial performance. Environmental Research Letters, 16(4), 043006. http://dx.doi.org/10.1088/1748-9326/abdf08
Gallo, A. (2016). A refresher on return on assets and return on equity. Harvard Business Review, 2-6. Retrieved from https://hbr.org/2016/04/a-refresher-on-return-on-assets-and-return-on-equity
Garcia, A. S., Mendes-Da-Silva, W., & Orsato, R. J. (2017). Sensitive industries produce better ESG performance: Evidence from emerging markets. Journal of cleaner production, 150, 135-147. https://doi.org/10.1016/j.jclepro.2017.02.180
Ghani, R. A., Samah, A. R. A., Baharuddin, N. S., & Ahmad, Z. (2023). Determinants of firm value as measured by the Tobin’s Q: a case of Malaysian plantation sector. Int J Acad Res Account Financ Manag Sci, 13(2), 420-432. http://dx.doi.org/10.6007/IJARAFMS/v13-i2/17268
Giannopoulos, G., Kihle Fagernes, R. V., Elmarzouky, M., & Afzal Hossain, K. A. B. M. (2022). The ESG disclosure and the financial performance of Norwegian listed firms. Journal of Risk and Financial Management, 15(6), 237. http://dx.doi.org/10.3390/jrfm15060237
Griffin, P. A., Lont, D. H., & Sun, E. Y. (2017). The relevance to investors of greenhouse gas emission disclosures. Contemporary Accounting Research, 34(2), 1265-1297. https://doi.org/10.1111/1911-3846.12298
Gupta, J., & Kashiramka, S. (2024). Examining the impact of liquidity creation on bank stability in the Asia Pacific region: Do ESG disclosures play a moderating role?. Journal of International Financial Markets, Institutions and Money, 91, 101955. https://doi.org/10.1016/j.intfin.2024.101955
Handoyo, S., & Anas, S. (2024). The effect of environmental, social, and governance (ESG) on firm performance: the moderating role of country regulatory quality and government effectiveness in ASEAN. Cogent Business & Management, 11(1), 2371071. https://doi.org/10.1080/23311975.2024.2371071
Hasanuddin, R., Darman, D., Taufan, M. Y., Salim, A., Muslim, M., & Putra, A. H. P. K. (2021). The effect of firm size, debt, current ratio, and investment opportunity set on earnings quality: an empirical study in Indonesia. The Journal of Asian Finance, Economics and Business, 8(6), 179-188. https://doi.org/10.13106/jafeb.2021.vol8.no6.0179
Heiss, A. (2021, December 1). A guide to working with country-year panel data and Bayesian multilevel models. Andrew Heiss.
Houqe, M. N., Opare, S., Zahir-ul-Hassan, M. K., & Ahmed, K. (2022). The effects of carbon emissions and agency costs on firm performance. Journal of Risk and Financial Management, 15(4), 152. https://doi.org/10.3390/jrfm15040152
International Maritime Organization. (2020). Fourth Greenhouse Gas Study 2020. IMO. https://www.imo.org/en/OurWork/Environment/Pages/Fourth-IMO-Greenhouse-Gas-Study-2020.aspx
Kozak, S. (2021). Will the reduction of co2 emissions lower the cost of debt financing? The case of EU countries. Energies, 14(24), 8361. https://doi.org/10.3390/en14248361
Lamb, W. F., Wiedmann, T., Pongratz, J., Andrew, R., Crippa, M., Olivier, J. G., ... & Minx, J. (2021). A review of trends and drivers of greenhouse gas emissions by sector from 1990 to 2018. Environmental research letters, 16(7), 073005. http://dx.doi.org/10.1088/1748-9326/abee4e
Lee, K. H., Min, B., & Yook, K. H. (2015). The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance. International Journal of Production Economics, 167, 1-11. https://doi.org/10.1016/j.ijpe.2015.05.018
Li, J., & Xu, X. (2024). Can ESG rating reduce corporate carbon emissions?–An empirical study from Chinese listed companies. Journal of Cleaner Production, 434, 140226. https://doi.org/10.1016/j.jclepro.2023.140226
Li, Q., Tang, W., & Li, Z. (2024). ESG systems and financial performance in industries with significant environmental impact: a comprehensive analysis. Frontiers in Sustainability, 5, 1454822. https://doi.org/10.3389/frsus.2024.1454822
Li, W., Padmanabhan, P., & Huang, C. H. (2024). ESG and debt structure: Is the nature of this relationship nonlinear?. International Review of Financial Analysis, 91, 103027. https://doi.org/10.1016/j.irfa.2023.103027
Lin, B., & Okoye, J. O. (2023). Towards renewable energy generation and low greenhouse gas emission in high-income countries: Performance of financial development and governance. Renewable Energy, 215, 118931. https://doi.org/10.1016/j.renene.2023.118931
LSEG. (2023). Data & Analytics. ESG combined score. https://www.lseg.com/content/dam/lseg/en_us/documents/investor-relations/events/presentation/lseg-cmd-data-and-analytics-presentation-2023.pdf
Luo, D. (2022). ESG, liquidity, and stock returns. Journal of International Financial Markets, Institutions & Money, 78, 101526. https://doi.org/10.1016/j.intfin.2022.101526
Marasigan, L. G. (2024). The Impact of ESG Scores on Financial Performance of Publicly Listed banks in the ASEAN Region. SEISENSE Business Review, 4(1), 149-162. https://doi.org/10.33215/50da8p25
Martín-Ortega, J. L., & González-Sánchez, M. (2023). Sectoral composition of GDP and greenhouse gas emissions: an empirical analysis in EU27. Environment, Development and Sustainability, 1-28. https://doi.org/10.1007/s10668-023-04048-5
Naeem, N., Cankaya, S., & Bildik, R. (2022). Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets. Borsa Istanbul Review, 22, S128-S140. http://dx.doi.org/10.1016/j.bir.2022.11.014
Narula, R., Rao, P., Kumar, S., & Matta, R. (2024). ESG scores and firm performance-evidence from emerging market. International Review of Economics & Finance, 89, 1170-1184. https://doi.org/10.1016/j.iref.2023.08.024
Nurhikmawaty, D., Isnurhadi, I., Widiyanti, M., & Yuliani, Y. (2020). The effect of debt to equity ratio and return on equity on stock return with dividend policy as intervening variables in subsectors property and real estate on BEI. Edunomic Jurnal Pendidikan Ekonomi, 8(2), 72-85. https://doi.org/10.33603/ejpe.v8i2.3531
Pan, F. (2021). ESG disclosure and performance in Southeast Asia. Sustainalytics. https://www.sustainalytics.com/esg-research/resource/investors-esg-blog/esg-disclosure-and-performance-in-southeast-asia
Qi, G. Y., Zeng, S. X., Shi, J. J., Meng, X. H., Lin, H., & Yang, Q. X. (2014). Revisiting the relationship between environmental and financial performance in Chinese industry. Journal of environmental management, 145, 349-356. https://doi.org/10.1016/j.jenvman.2014.07.010
Reber, B., Gold, A., & Gold, S. (2022). ESG disclosure and idiosyncratic risk in initial public offerings. Journal of Business Ethics, 179(3), 867-886. https://doi.org/10.1007/s10551-021-04847-8
Rehman, I. U., Shahzad, F., Hanif, M. A., Arshad, A., & Sergi, B. S. (2024). Financial constraints and carbon emissions: an empirical investigation. Social Responsibility Journal, 20(4), 761-782. https://doi.org/10.1108/srj-01-2023-0014
Rokhmawati, A., Sathye, M., & Sathye, S. (2015). The effect of GHG emission, environmental performance, and social performance on financial performance of listed manufacturing firms in Indonesia. Procedia-Social and Behavioral Sciences, 211, 461-470. https://doi.org/10.1016/j.sbspro.2015.11.061
Ruan, L., & Liu, H. (2021). Environmental, social, governance activities and firm performance: Evidence from China. Sustainability, 13(2), 767. https://doi.org/10.3390/su13020767
S&P Dow Jones Indices. (2020). Index carbon metrics explained. S&P Global. https://www.spglobal.com/spdji/en/documents/additional-material/spdji-esg-carbon-metrics.pdf
Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management science, 59(5), 1045-1061. https://doi.org/10.1287/mnsc.1120.1630
Shah, M. (2024). A comprehensive guide to panel data regression in R. The Data Hall.
Shakil, M. H. (2021). Environmental, social and governance performance and financial risk: Moderating role of ESG controversies and board gender diversity. Resources Policy, 72, 102144. https://doi.org/10.1016/j.resourpol.2021.102144
Shan, Y. G. (2019). Managerial ownership, board independence and firm performance. Accounting Research Journal, 32(2), 203-220. http://dx.doi.org/10.1108/ARJ-09-2017-0149
Shobhwani, K., & Lodha, S. (2023). Impact of ESG risk scores on firm performance: An empirical analysis of NSE-100 companies. Asia-Pacific Journal of Management Research and Innovation, 19(1), 7-18. https://doi.org/10.1177/2319510X231170910
Singapore Exchange [SGX]. (2024). Listing rules. SGX Group.
Smith, D. J., & Wentworth, J. (2022). Mining and the sustainability of metals. Parliamentary Office of Science and Technology, UK Parliament, London. Retrieved from https://figshare.le.ac.uk/ndownloader/files/33988796
Statista. (2023). Average market capitalization of companies worldwide in 2019, by environmental, social and governance (ESG) score band and ESG framework provider.
Susilawati, D., Shavab, F. A., & Mustika, M. (2022). The effect of debt to equity ratio and current ratio on return on assets. Journal of Applied Business, Taxation and Economics Research, 1(4), 325-337. https://doi.org/10.54408/jabter.v1i4.61
Tilleke & Gibbins. (2024). ESG in Vietnam: Legal framework and path to compliance. Tilleke & Gibbins (Vietnam) Ltd. https://www.tilleke.com/insights/esg-in-vietnam-legal-framework-and-path-to-compliance/
Trinks, A., Ibikunle, G., Mulder, M., & Scholtens, B. (2017). Greenhouse gas emissions intensity and the cost of capital. Retrieved from https://research-portal.st-andrews.ac.uk/en/publications/greenhouse-gas-emissions-intensity-and-the-cost-of-capital
Van Emous, R., Krušinskas, R., & Westerman, W. (2021). Carbon emissions reduction and corporate financial performance: the influence of country-level characteristics. Energies, 14(19), 6029. http://dx.doi.org/10.3390/en14196029
Veeravel, V., Murugesan, V. P., & Narayanamurthy, V. (2024). Does ESG disclosure really influence the firm performance? Evidence from India. The Quarterly Review of Economics and Finance, 95, 193-202. https://doi.org/10.1016/j.qref.2024.03.008
Vikas, N. (2024). Navigating climate risks: 3 strategies for building resilient financial institutions. World Economic Forum.
Wang, K., Li, T., San, Z., & Gao, H. (2023). How does corporate ESG performance affect stock liquidity? Evidence from China. Pacific-Basin Finance Journal, 80, 102087. https://doi.org/10.1016/j.pacfin.2023.102087
Weston, P., & Nnadi, M. (2023). Evaluation of strategic and financial variables of corporate sustainability and ESG policies on corporate finance performance. Journal of Sustainable Finance & Investment, 13(2), 1058-1074. https://doi.org/10.1080/20430795.2021.1883984
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data MIT press. Cambridge, ma, 108(2), 245-254. Retrieved from https://ipcid.org/evaluation/apoio/Wooldridge%20-%20Cross-section%20and%20Panel%20Data.pdf
World Bank. (2023). World Bank open data. Retrieved from https://data.worldbank.org/
World Business Council for Sustainable Development (WBCSD). (n.d.). World Business Council for Sustainable Development (WBCSD). https://www.wbcsd.org/
Zhou, H., Liu, M., & Tan, Y. (2023). Long-term emission reduction strategy in a three-echelon supply chain considering government intervention and Consumers’ low-carbon preferences. Computers & Industrial Engineering, 186, 109697. https://doi.org/10.1016/j.cie.2023.109697
Downloads
Published
Issue
Section
Citation Check
License
Copyright (c) 2025 Alyssa Shanly Elago, Ann Therese Capangpangan, Mary Joe Sabino, Sendy Gacho, Joshua Marcelo, Ethel Catamco
This work is licensed under a Creative Commons Attribution 4.0 International License.
