Implementation of Green Financial Management and Its Impact on The Financial Performance of SRI-KEHATI Indexed Companies

Abstract

This study examines the impact of Corporate Social Responsibility (CSR) and environmental performance, as measured by the PROPER rating, on the financial performance of companies listed in the Sri Kehati Index. The research employs a quantitative approach with Structural Equation Modeling (SEM) using Partial Least Square (PLS) to analyze data from 25 companies over the period from 2018 to 2023. The results indicate that both CSR and environmental performance have significant positive effects on financial performance, measured by Return on Assets (ROA). However, when firm size is introduced as an intervening variable, CSR does not significantly influence ROA, while environmental performance continues to have a significant impact. This suggests that environmental initiatives are more strongly linked to financial outcomes, potentially due to their influence on firm size, which, in turn, affects profitability. The study highlights the importance of integrating environmental management into corporate strategies to enhance financial performance and suggests that larger firms with better environmental performance may experience better financial results, despite potential challenges related to asset management during economic downturns.