Purpose This study analyzes the impact of environmental performance (measured by the PROPER score) and ESG performance (measured by the ESG score) on firm value among companies included in the ESGSKEHATI index. It also examines the value relevance of these relationships following the implementation of Indonesia's carbon market. Design/methodology/approach Panel data analysis is employed using a sample of 56 companies that were listed in ESGSKEHATI index between 2019 and 2023. The secondary data used in this study are obtained from Refinitiv, as well as from companies' annual and sustainability report. Findings Environmental performance alone has an insignificant impact on firm value, whereas ESG performance enhances firm value. When ESG performance is taken into account, the carbon market adds value relevance to environmental performance but not to ESG performance. Research limitations/implications This research examines only one year following the implementation of the carbon market in Indonesia, and not all companies are assessed under the PROPER program by the Ministry of Environment and Forestry of Indonesia. Social implications Companies should prioritize ESG performance in supporting sustainability, as ESG scores significantly influence shareholder perceptions and investment decisions, as well as monitoring environmental initiatives, especially after the carbon market, where environmental performance becomes important. Originality/value This study contributes by comparing shareholder reactions to sustainability efforts, exploring the impact of carbon market announcements and highlighting the importance of Environmental and ESG metrics in developing countries. The research also aligns with United Nations Sustainability Development Goals (SDGs), particularly Goals 9 and 12.
Tarigan et al. (2026) studied this question.