Green Investment and Financial Performance: Analysis of the Impact of Sustainable Investment
DOI:
https://doi.org/10.61942/oikonomia.v3i3.609Keywords:
Green Investment, Financial Performance, ESG, Sustainable Finance, Corporate PerformanceAbstract
This study investigates the relationship between green investment and corporate financial performance, analyzing the impact of sustainable investment practices on key financial indicators including Return on Assets (ROA), Return on Equity (ROE), and Tobin's Q. As environmental concerns grow and regulatory frameworks tighten globally, firms are increasingly allocating resources toward environmentally sustainable activities. Drawing upon a systematic review of 20 peer-reviewed studies published between 2018 and 2025, this research synthesizes evidence on whether green investments translate into measurable financial gains or represent a cost burden for firms. The analysis encompasses diverse industries and geographic contexts, including Indonesia, Europe, Ireland, and global markets. Findings reveal that green investment generally yields a positive effect on financial performance, particularly in the long run, though the magnitude varies by industry, firm size, and institutional environment. Environmental, Social, and Governance (ESG) disclosure quality and corporate social responsibility (CSR) practices are identified as significant mediating factors. Green financing instruments such as green bonds also contribute to enhanced corporate performance. This study contributes to the growing body of sustainable finance literature by providing a comprehensive overview of mechanisms linking green investment to financial outcomes and offers.
References
Abed, I. J. (2024). The Impact Of Green Financing On Sustainable Financial Performance. Harmoni Economics: International Journal of Economics and Accounting. https://doi.org/10.70062/harmonieconomics.v1i4.52
Barakat, H. A., Hossam, N., Tarek, N., & Mohamed, S. (2024). The Impact of Sustainable Investing on Financial Performance. International Journal of Economics and Finance. https://doi.org/10.5539/ijef.v16n7p86
Casciello, R., Santonastaso, R., Prisco, M., & Martino, I. (2024). Green innovation and financial performance. The role of R&D investments and ESG disclosure. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.2862
Chariri, A., Bukit, G. R. S. B., Eklesia, O. B., Christi, B. U., & Tarigan, D. M. (2018). Does Green Investment Increase Financial Performance? Empirical Evidence from Indonesian Companies. E3S Web of Conferences, 31, 9001. https://doi.org/10.1051/e3sconf/20183109001
Chen, Y., & Yanbai. (2021). Does green investment improve energy firm performance? Energy Policy, 153, 112252. https://doi.org/10.1016/j.enpol.2021.112252
Cortez, M., Andrade, N., & Silva, F. (2022). The environmental and financial performance of green energy investments: European evidence. Ecological Economics. https://doi.org/10.1016/j.ecolecon.2022.107427
Elarabi, H. O., & Khalifa, W. (2025). Impact of Sustainable Finance on Business Financial Performance: Insight from London Stock Exchange Firms. Sustainability. https://doi.org/10.3390/su17114898
Eliza, E. (2024). Sustainable Investment Practices: Assessing the Influence of ESG Factors on Financial Performance. Global International Journal of Innovative Research. https://doi.org/10.59613/global.v2i7.228
Galloppo, G., Guida, R., & Urbani, R. (2025). Green Initiatives, Financial Performance, and Institutional Investors. European Financial Management. https://doi.org/10.1111/eufm.70029
Hidayat, G., Dewi, K. H., Utama, A. N. B., & Zikriani, H. (2024). Green Finance: Evaluating the Impact of Sustainable Investments on Corporate Performance of Islamic Bank in Indonesia. International Journal of Business, Law, and Education. https://doi.org/10.56442/ijble.v5i2.772
Indriastuti, M., & Chariri, A. (2021). The role of green investment and corporate social responsibility investment on sustainable performance. Cogent Business & Management, 8. https://doi.org/10.1080/23311975.2021.1960120
Lei, X., & Yu, J. (2023). Striving for sustainable development: Green financial policy, institutional investors, and corporate ESG performance. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.2630
Li, X., & Khan, I. (2025). Green Transformation in Portfolio: The Role of Sustainable Practices in Investment Decisions. Sustainability. https://doi.org/10.3390/su17031055
Muyiwa-Ajayi, T. P., Sobowale, A., & Augoye, O. (2024). The Financial Impact of Sustainable Investments on Corporate Profitability. International Journal of Multidisciplinary Research and Growth Evaluation. https://doi.org/10.54660/.ijmrge.2024.5.1.1372-1377
Saher, K., Zafar, M. F., & Siddique, Q. (2023). The Impact of Corporate Social Responsibility (CSR) and Green Investments on Sustainable Performance: The Mediating Role of Firm Financial Performance. Global Economics Review. https://doi.org/10.31703/ger.2023(viii-i).06
Shen, Z., Guan, Y., Xu, Y., Xu, Q., & Andlib, Z. (2023). Green financial investment and its influence on economic and environmental sustainability: does privatization matter? Environmental Science and Pollution Research, 30, 91046–91059. https://doi.org/10.1007/s11356-023-28520-x
Siedschlag, I., & Yan, W. (2023). Do green investments improve firm performance? Empirical evidence from Ireland. Technological Forecasting and Social Change. https://doi.org/10.1016/j.techfore.2022.122181
Taswin, M., Judijanto, L., Sudarmanto, E., & Astuti, A. (2023). Analysis of the Impact of Green Investment on Corporate Financial Sustainability in West Java. West Science Interdisciplinary Studies. https://doi.org/10.58812/wsis.v1i11.344
Ye, J., & Dela, E. (2023). The Effect of Green Investment and Green Financing on Sustainable Business Performance of Foreign Chemical Industries Operating in Indonesia: The Mediating Role of Corporate Social Responsibility. Sustainability. https://doi.org/10.3390/su151411218
Zhang, D., & Lucey, B. (2022). Sustainable behaviors and firm performance: The role of financial constraints' alleviation. Economic Analysis and Policy. https://doi.org/10.1016/j.eap.2022.02.003
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Ida Ayu Putu Megawati, Ni Nengah Rupadi Kertiriasih, Made Ratih Nurmalasari, Putu Putri Prawitasari, Ni Putu Ari Krismajayanti
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
