THE EFFECT OF ESG DISCLOSURE AND CARBON EMISSION DISCLOSURE ON COMPANY INVESTMENT DECISIONS: A STUDY OF THE ENERGY AND MINING SECTORS IN INDONESIA

Abstract

The increasing integration of Environmental, Social, and Governance (ESG) principles in financial markets has stimulated the development of ESG-based investment products, including mutual funds. However, empirical evidence on whether ESG mutual funds outperform conventional equity funds remains inconclusive, particularly in emerging markets such as Indonesia. This study aims to compare the performance and risk characteristics of ESG mutual funds and conventional equity mutual funds in the Indonesian capital market. The analysis focuses on ESG index-based mutual funds that track the SRI-KEHATI and MSCI ESG indices and compares them with actively managed conventional equity mutual funds during the 2021–2025 period. Portfolio performance is evaluated using risk-adjusted performance measures, including the Sharpe Ratio, Treynor Ratio, and Jensen’s Alpha. In addition, the study incorporates supporting secondary data related to investor behaviour and investment horizon characteristics to provide a broader understanding of ESG investment strategies. The findings are expected to provide empirical evidence regarding the financial viability of ESG mutual funds and contribute to the literature on sustainable finance in emerging markets. The results may also offer practical insights for investors, asset managers, and policymakers in developing effective sustainable investment strategies in Indonesia.