From Sustainability to Profit: The Role of Green Accounting and ESG in the Banking Sector
DOI:
https://doi.org/10.38035/jafm.v6i5.2586Keywords:
Banking, ESG Disclosure, Financial Performance, Green Accounting, SustainabilityAbstract
This study examines the effects of Green Accounting and Environmental, Social, and Governance (ESG) disclosure on financial performance and firm value in Indonesian banks from 2022 to 2024. Sustainability has gained attention due to regulatory requirements and stakeholder expectations, but its financial impact in banking is not well understood. Using a quantitative panel data approach, secondary data from annual reports, sustainability reports, financial statements, and market sources were analyzed. Classical assumption tests ensured model validity, and the Common Effect Model with robust clustered standard errors addressed heteroskedasticity and autocorrelation. Results reveal that Green Accounting has a positive but insignificant effect on Return on Assets, while ESG disclosure has a positive and significant effect on financial performance when examined jointly with Green Accounting. Neither Green Accounting nor ESG disclosure significantly affects market valuation measured by Tobin’s Q. The findings suggest that sustainability practices improve internal financial outcomes but have limited impact on investor perceptions. Banks are encouraged to enhance ESG measurement and disclosure quality, integrate ESG into KPIs and management incentives, and adopt standardized reporting with external assurance mechanisms.
References
Adams, C. A. (2021). Sustainability Reporting and Accountability: Developments and Future Directions. Accounting, Auditing & Accountability Journal, 34(9), 2272–2290. https://doi.org/10.1108/AAAJ-03-2021-5174
Ahmad, N., Li, H., & Raza, S. (2023). Does ESG Disclosure Enhance Firm Value? Evidence from Emerging Markets. Sustainability, 15(4), 1782.
Alsaifi, K., Elnahass, M., & Salama, A. (2020). Market Response to Firms’ Environmental, Social and Governance Disclosures: Empirical Evidence from the Banking Industry. Journal of Business Ethics, 163(3), 611–639. https://doi.org/10.1007/s10551-018-4059-4
Birindelli, G., Miazza, A., & Palea, V. (2025). The Influence of External Contextual and Firm-Specific Stakeholder Voices on Banks’ Greenwashing: Effective Monitoring or an Incentive to Deceive? Business Strategy and the Environment. https://doi.org/10.1002/bse.70151
Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (Fifteenth). Cengage Learning.
Broadstock, D. C., Chan, K., Cheng, L. T. W., & Wang, X. (2021). The Role of ESG Performance During Times of Financial Crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716. https://doi.org/10.1016/j.frl.2020.101716
Chytis, E. (2024). Corporate Sustainability and ESG Performance: New Insights from European Firms. Journal of Business Ethics, 189(2), 245–263.
Djasuli, M., & Maulidia, Z. (2025). Persepsi Auditor terhadap Pemanfaatan Decision Tree dalam Evaluasi Kinerja Pengawasan Inspektorat Kabupaten Bangkalan. EKOMA : Jurnal Ekonomi, Manajemen, Akuntansi, 4(5), 7704–7710. https://doi.org/10.56799/ekoma.v4i5.9515
Effendi, M. I., Darmawan, M., & Aulia, F. (2022). ESG Disclosure and Its Impact on Firm Performance: Evidence from Indonesia’s Banking Sector. Jurnal Akuntansi Dan Keuangan Indonesia, 19(2), 145–162. https://doi.org/10.21002/jaki.v19i2.145
Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG Performance and Firm Value: The Moderating Role of Disclosure. Global Finance Journal, 38, 45–64. https://doi.org/10.1016/j.gfj.2017.03.001
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Pitman.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and Financial Performance: Aggregated Evidence from More Than 2,000 Empirical Studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
Gupta, R., & Kashiramka, S. (2025). The Effects of ESG and Institutional Quality on Financial Stability: Evidence from GCC Banks. ProQuest Open Access. https://search.proquest.com/openview/da947bc5ee5e6dea8bd47eee0a7c4174/1?pq-origsite=gscholar&cbl=816338
Hermawan, A., & Gunardi, A. (2019). Sustainability Reporting and Firm Value: The Role of Corporate Governance and Government Ownership in Indonesia. Sustainability Accounting, Management and Policy Journal, 10(4), 620–638. https://doi.org/10.1108/SAMPJ-04-2018-0090
Herwanda, R. P., Aulia, M. C., Febyandhani, A. C., & Djasuli, M. (2025). Revealing the Reasons for the Implementation of PKB and BBNKB Options to Increase Regional Taxes. Jurnal Maneksi, 14(2), 559–567. https://doi.org/10.31959/jm.v14i2.2971
Hery. (2021). Analisis Laporan Keuangan. PT Grasindo.
Hörisch, J., Schaltegger, S., & Freeman, R. E. (2020). Integrating Stakeholder Theory and Sustainability Accounting: A Conceptual Synthesis. Journal of Business Ethics, 162(2), 281–298. https://doi.org/10.1007/s10551-019-04112-y
Kartiko, N. D., & Indradewi, A. A. (2024). The Urgency of Green Banking Regulations in Indonesia in the Implementation of Sustainable Development. Asian Economic and Law Review, 5(2). https://doi.org/10.25041/aelr.v5i2.3604
Kotsantonis, S., Pinney, C., & Serafeim, G. (2016). ESG Integration in Investment Management: Myths and Realities. Journal of Applied Corporate Finance, 28(2), 10–16. https://doi.org/10.1111/jacf.12169
Krueger, P. (2024). ESG and Corporate Financial Performance: A Meta-Analytic Review. Journal of Sustainable Finance & Investment.
Le, T. D., Do, H. T. T., Nguyen, T. P., & Nguyen, H. T. (2022). Environmental, Social, and Governance (ESG) Disclosure and Firm Performance: Evidence from Emerging Markets. Sustainability, 14(5), 2713. https://doi.org/10.3390/su14052713
Nguyen, H. T., & Tran, T. M. (2022). Green Accounting and Firm Profitability: Evidence from Emerging Economies. Sustainability, 14(21), 14162. https://doi.org/10.3390/su142114162
Pham, H. S. T., & Doan, T. N. (2022). ESG Disclosure and Firm Value: Empirical Evidence from Emerging Markets. Sustainability, 14(6), 3552. https://doi.org/10.3390/su14063552
Puspitasari, A., & Firmansyah, A. (2025). Sustainable Finance and Green Banking Disclosure: Unlocking Firm Value Potential. Riset: Jurnal Ilmiah Akuntansi Dan Keuangan. http://ejournal.ibik.ac.id/index.php/riset/article/view/2591
Schaltegger, S., & Csutora, M. (2012). Carbon Accounting for Sustainability and Management: Status Quo and Challenges. Journal of Cleaner Production, 36, 1–16. https://doi.org/10.1016/j.jclepro.2012.06.024
Silalahi, D., Silalahi, H., Barus, B., & Sitompul, G. T. (2023). Governance, Regulation, and Green Banking Disclosure: An Empirical Study of Indonesian Banks. Jurnal Ilmiah Akuntansi Kesatuan (JIAKES). https://jurnal.ibik.ac.id/index.php/jiakes/article/view/2844
Suchman, M. C. (1995). Managing Legitimacy: Strategic and Institutional Approaches. Academy of Management Review, 20(3), 571–610.
Sundarasen, S. D. (2024). Green Accounting Practices and Sustainability Performance in the Banking Sector: Evidence from Emerging Economies. Sustainability Accounting, Management and Policy Journal.
Yusoff, H., & Darus, F. (2019). The Influence of Environmental Accounting on Corporate Performance: Evidence from the Manufacturing Sector in Malaysia. Journal of Cleaner Production, 237, 117–127. https://doi.org/10.1016/j.jclepro.2019.117127
Zulkifli, M., & Haron, H. (2023). Environmental Accounting Practices and Their Impact on Financial Performance: Evidence from Malaysian Financial Institutions. Asian Journal of Accounting Research, 8(2), 145–161. https://doi.org/10.1108/AJAR-04-2022-0061
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Mohamad Djasuli, Anita Nuris Lestari, Fatimatus Zahra Ayu, R. Choirur Rizki, Syamsuddin Syamsuddin
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish their manuscripts in this journal agree to the following conditions:
- The copyright on each article belongs to the author(s).
- The author acknowledges that the Journal of Accounting and Finance Management (JAFM) has the right to be the first to publish with a Creative Commons Attribution 4.0 International license (Attribution 4.0 International (CC BY 4.0).
- Authors can submit articles separately, arrange for the non-exclusive distribution of manuscripts that have been published in this journal into other versions (e.g., sent to the author's institutional repository, publication into books, etc.), by acknowledging that the manuscript has been published for the first time in the Journal of Accounting and Finance Management (JAFM).
