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Open Access · Peer Reviewed · ISSN 2383-9449
Journal of Contemporary Eastern AsiaEast & Southeast Asia · Networks · Communication

Research Article · Vol. 25, No. 1 (2026) · pp. 140-165

Peer reviewed — at least two external reviewers, single-anonymised. Editorial process

Green Financial Policies and Corporate ESG Performance: An Analysis of Difference-in-Differences in Indonesia's Manufacturing Sector

  • Justita Dura — Department of Accounting, Institut Teknologi dan Bisnis Asia Malang
  • Satya Fauziah — Department of Accounting, Institut Teknologi dan Bisnis Asia Malang

Published Jun 30, 2026 · https://doi.org/10.17477/jcea.2026.25.1.140

Abstract

Green finance is essential in motivating corporations to incorporate environmental, social, and governance (ESG) norms into their operations. This study seeks to examine the impact of green financing regulations on enhancing ESG performance within Indonesia's manufacturing sector, utilizing data from publicly listed businesses from 2015 to 2023. A quasi-experimental methodology utilizing the Difference-in-Differences (DID) model is employed to assess the effects of this strategy. The study's results indicate that (1) green finance policies markedly enhance the ESG performance of manufacturing firms, particularly those with sufficient financial resources to comply with policy mandates. (2) The policy encourages the development of green innovations, such as investment in environmentally friendly technologies and the adoption of sustainability practices. However, the impact of reducing corporate pollution emissions is still limited because the company's focus tends to be on initial risk mitigation rather than efforts to handle postproduction pollution. 3) According to a heterogeneity study, businesses located in areas with more stringent environmental regulations are more receptive to green finance initiatives than those in areas with less stringent regulations. These findings have significant ramifications for Indonesia's creation of more effective green finance regulations, raising corporate ESG awareness, and promoting cooperation between industry participants and regulators to meet sustainability and carbon neutrality targets.

Keywords:Green FinanceEnvironmentalSocialGovernanceCorporate

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