ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) IMPACT ON INVESTMENT DECISIONS AND FINANCIAL PERFORMANCE

Abstract

The development of modern capital markets shows that investment considerations no longer focus solely on financial aspects but also incorporate sustainability practices represented through Environmental, Social, and Governance (ESG). ESG is viewed as a key indicator reflecting corporate responsibility toward the environment, society, and good governance, serving as an essential basis for investors in making investment decisions. This study employs a Systematic Literature Review (SLR) approach by analyzing 10 scientific articles indexed in Sinta and Google Scholar from 2020 to 2025. The findings reveal that ESG practices, overall, have a positive impact on investment decisions and corporate financial performance. The main factors supporting ESG’s influence include profitability, firm size and age, good corporate governance, and investment efficiency. However, leverage has a negative effect, while liquidity shows no significant impact on financial performance. Overall, these findings emphasize that ESG implementation acts as a positive signal to investors by increasing trust, market value, and corporate competitiveness