EXPLORING ESG AND FINANCIAL PERFORMANCE: LEVERAGE AS MODERATOR IN THE INDONESIAN CONSUMER NON-CYCLICAL SECTOR

Faculty of Digital Business and Law, Maranatha Christian University, Bandung, Indonesia

Abstract

This study examines the impact of Environmental, Social, and Governance (ESG) Practices on financial performance, moderated by leverage in Indonesia’s consumer non-cyclicals sector. Prior research presents contradictory findings and limited exploration of leverage as a moderating variable, particularly in the consumer non-cyclicals sector. Using purposive sampling, seven (7) companies consistently reported  ESG Scores from 2020 to 2024 were selected. Panel regression analysis with a fixed effect model was employed. The test shows a significant negative effect of ESG and leverage (as proxy by Debt Equity Ratio/DER) on financial performance (as proxy by ROA). Furthermore, leverage moderates the impact of ESG on financial performance. From this result, this study suggests that firms must carefully balance their ESG implementation commitments with their capital structure. A high level of leverage can increase the risk of corporate losses. Companies need to align their ESG implementation strategies with corporate sustainability by ensuring long-term value creation.