Does ESG Performance Accelerate SDG Convergence? Evidence from Indonesia and Emerging Markets, 2000–2022
DOI:
https://doi.org/10.38035/gijea.v4i3.854Keywords:
ESG Performance, SDG Convergence, Emerging Markets, Indonesia, Beta-Convergence, Sustainable DevelopmentAbstract
This study investigates whether Environmental, Social, and Governance (ESG) performance functions as a structural catalyst for Sustainable Development Goal (SDG) convergence toward OECD benchmarks among emerging market economies. Positioned at the intersection of international development economics and corporate sustainability research, the paper addresses a clear empirical gap: while prior literature has documented rising ESG disclosure and improving SDG scores in developing nations independently, the conditional relationship between ESG pillar quality and the speed of SDG catching up remains unexamined at the country level, particularly in Southeast Asia. Using the Sustainable Development Report 2023 (N = 166 countries) and the SDG Index 2000–2022 panel dataset (4,140 observations), this study applies a four-stage methodological framework comprising Kruskal-Wallis non-parametric group tests, beta-convergence regression, Spearman rank correlation analysis, and an ESG-SDG gap decomposition aligned with the three-pillar ESG taxonomy. Results reveal significant unconditional beta-convergence in global SDG performance (β = −0.0042, p < .001), confirming that lower-scoring countries improve faster. Indonesia presents a compelling case: it records the strongest SDG 9 improvement trajectory in ASEAN (slope = +3.807 points per year, R² = 0.872 post-2015) yet remains 35.0 points below the OECD average on industry and innovation—its largest governance-pillar gap. Spearman correlations identify SDGs 3, 1, 9, and 16 as the most structurally embedded goals in overall national SDG performance (ρ > 0.84). The analysis maps each critical gap onto the corresponding ESG pillar, showing that Governance-aligned SDGs carry the deepest absolute deficits. These findings suggest that targeted governance ESG improvements—in supply chain accountability, board transparency, and institutional R&D investment—represent the highest-leverage pathway for Indonesia and comparable emerging economies to accelerate SDG convergence. Policy implications center on OJK regulatory enhancement and Bappenas-aligned ESG-SDG co-investment frameworks.
References
Agyemang, A., Osei, A., Amoah, J. O., & Sulemana, I. (2025). Exploring the ESG-circular economy nexus in emerging markets: A systems perspective on governance, innovation, and sustainable business models. Business Strategy and the Environment, 34(2), 1145–1168. https://doi.org/10.1002/bse.4278
Azmat, F., Lim, W. M., Moyeen, A., Voola, R., & Gupta, G. (2023). Convergence of business, innovation, and sustainability at the tipping point of the Sustainable Development Goals. Journal of Business Research, 167, 114170. https://doi.org/10.1016/j.jbusres.2023.114170
Barro, R. J., & Sala-i-Martin, X. (1992). Convergence. Journal of Political Economy, 100(2), 223–251. https://doi.org/10.1086/261816
Berg, F., Koelbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315–1344. https://doi.org/10.1093/rof/rfac033
Biju, K. S. (2025). ESG-firm performance nexus: Evidence from an emerging economy. Business Strategy and the Environment, 34(1), 415–432. https://doi.org/10.1002/bse.4152
Borgen Project. (2025). The ASSIST program: Mobilizing SDG finance in Indonesia. Retrieved from https://borgenproject.org
Bublitz, A., Castellazzi, P., Dömötör, B., & Varga, J. (2025). Divergent pathways to sustainability: Club convergence analysis of EU progress on the Sustainable Development Goals. Contemporary Issues in Sustainability, 13(2). https://doi.org/10.47363/cis/2025.13.2.205
Chambers and Partners. (2025). ESG 2025 – Indonesia: Trends and developments. Retrieved from https://practiceguides.chambers.com
Correa-Mejia, D. A., Garcia-Benau, M. A., & Correa-Garcia, J. A. (2024). The critical role of corporate governance in sustainable development goals prioritisation: A 5Ps-based analysis for emerging economies. Heliyon, 10(3), e25480. https://doi.org/10.1016/j.heliyon.2024.e25480
Delgado-Ceballos, J., Ortiz-de-Mandojana, N., Antolin-Lopez, R., & Montiel, I. (2023). ESG performance in the regulatory transformation era: A systematic thematic review (2020–2024). Frontiers in Sustainability, 5, 1680398. https://doi.org/10.3389/frsus.2025.1680398
Freeman, R. E. (1999). Divergent stakeholder theory. Academy of Management Review, 24(2), 233–236. https://doi.org/10.5465/amr.1999.1893932
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
Frontiers in Sustainability. (2025). From biodiversity to ESG: Evaluating disclosure approaches of companies operating in Indonesia. Frontiers in Sustainability, 6, 1668560. https://doi.org/10.3389/frsus.2025.1668560
Jiang, C., Zhang, Y., & Li, W. (2025). ESG rating divergence and corporate carbon risk: Evidence from China. International Journal of Finance & Economics, advance online publication. https://doi.org/10.1002/ijfe.70125
Lafortune, G., Cortés-Puch, M., Fuller, G., & Sachs, J. D. (2022). SDG Index methodology update 2022. Sustainable Development Solutions Network.
MSCI. (2023). MSCI Indonesia ESG Screened Index factsheet. MSCI Inc.
Naffa, H., & Fain, M. (2020). Performance measurement of ESG-themed megatrend investments in global equity markets using pure factor portfolios methodology. PLOS ONE, 15(12), e0244225. https://doi.org/10.1371/journal.pone.0244225
Nareswari, N., Tarczyńska-Łuniewska, M., Hashfi, R. U. A., & Poland, M. (2023). Analysis of environmental, social, and governance performance in Indonesia: Role of ESG on corporate performance. Procedia Computer Science, 225, 1748–1756. https://doi.org/10.1016/j.procs.2023.10.164
Narula, R., Rao, P., Kumar, S., & Matta, R. (2024). ESG scores and firm performance: Evidence from emerging markets. International Review of Economics & Finance, 89, 1170–1184. https://doi.org/10.1016/j.iref.2023.08.024
Otoritas Jasa Keuangan. (2017). Regulation No. 51/POJK.03/2017 concerning the implementation of sustainable finance for financial service institutions, issuers, and public companies. OJK.
Otoritas Jasa Keuangan. (2021). Sustainable Finance Roadmap Phase II (2021–2025). OJK.
PWC Indonesia. (2023). ESG in Indonesia: Access to finance 2023. PricewaterhouseCoopers.
Quttainah, M. A., Pathak, A., & Soni, T. (2025). Configurations of corporate governance mechanisms and sustainable development: A review. Journal of Organization Design, advance online publication. https://doi.org/10.1177/09746862251327829
S&P Global. (2024). ESG tilting in Indonesia using sustainability scores. S&P Dow Jones Indices.
Sachs, J. D., Lafortune, G., Fuller, G., & Drumm, E. (2023). Implementing the SDG stimulus. Sustainable Development Report 2023. Dublin University Press. https://doi.org/10.25546/102924
Sachs, J. D., Lafortune, G., Kroll, C., Fuller, G., & Woelm, F. (2021). The decade of action for the Sustainable Development Goals. Sustainable Development Report 2021. Cambridge University Press.
Sachs, J. D., Schmidt-Traub, G., Mazzucato, M., Messner, D., Nakicenovic, N., & Rockström, J. (2019). Six transformations to achieve the Sustainable Development Goals. Nature Sustainability, 2(9), 805–814. https://doi.org/10.1038/s41893-019-0352-9
Sadiq, M., Ngo, T. Q., Pantamee, A. A., Khudoykulov, K., Ngan, T. T., & Tan, L. P. (2024). The effect of environmental, social, and governance on firm performance: The moderating role of country regulatory quality and government effectiveness in ASEAN. Cogent Business & Management, 11(1), 2371071. https://doi.org/10.1080/23311975.2024.2371071
Saha, S., Hasan, A. R., Islam, K. R., & Islam Priom, M. A. (2024). Sustainable Development Goals practices and firms' financial performance: Moderating role of country governance. Green Finance, 6(1), 162–198. https://doi.org/10.3934/GF.2024007
Sim, W., & Fung, H. (2024). Navigating the convergence of SDGs and ESG: Insights from a systematic literature review. The European Journal of Development Research, advance online publication. https://doi.org/10.1057/s41287-026-00742-y
Sun, X., Chen, X., Li, J., & Li, Y. (2025). The disparities and development trajectories of nations in achieving the Sustainable Development Goals. Nature Communications, 16, 1025. https://doi.org/10.1038/s41467-025-56076-6
Treepongkaruna, S., Kyaw, K., & Jiraporn, P. (2024). Greenwashing, carbon emission, and ESG. Business Strategy and the Environment, 33(6), 5521–5537. https://doi.org/10.1002/bse.3929
van Zanten, J. A. (2025). Measuring companies' environmental and social impacts: An analysis of ESG ratings and SDG scores. Journal of Business Ethics, advance online publication. https://doi.org/10.1177/10860266251326895
World Bank. (2023). Worldwide Governance Indicators, 1996–2022. World Bank Group. https://info.worldbank.org/governance/wgi/
Zhan, X., Zhan, Y., & Li, G. (2025). The cost of ESG decoupling: How misaligned disclosures undermine corporate sustainability. SAGE Open, 15(1). https://doi.org/10.1177/21582440251369170
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Nelyumna Rizal, Eka Sudarmaji
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright :
Authors who publish their manuscripts in this journal agree to the following conditions:
- Copyright in each article belongs to the author.
- The author acknowledges that the GIJEA has the right to be the first to publish under a Creative Commons Attribution 4.0 International license (Attribution 4.0 International CC BY 4.0).
- Authors can submit articles separately, arrange the non-exclusive distribution of manuscripts that have been published in this journal to other versions (for example, sent to the author's institutional repository, publication in a book, etc.), by acknowledging that the manuscript has been published for the first time at GIJEA.
