ESG Disclosure and Cost of Debt in Indonesia's Energy Sector: Evidence from 2021-2024

Abstract

This study examines whether Environmental, Social, and Governance (ESG) disclosure is associated with the cost of debt of Indonesian energy sector companies while controlling for leverage and firm size. Secondary data were collected from the annual, financial, and sustainability reports of 17 energy companies listed on the Indonesia Stock Exchange (IDX) during 2021-2024, producing 68 firm-year observations. Environmental, social, and governance disclosure was measured through content analysis of GRI 2021 indicators, while the cost of debt was proxied by interest expense divided by total liabilities. The source study estimated multiple linear regression in SPSS 31 after applying a square-root transformation to the cost of debt. Environmental disclosure is insignificant (B=0.037, p=0.571), social disclosure is negative and significant (B=-0.138, p=0.048), and governance disclosure is insignificant (B=0.012, p=0.631). The reported OLS model is jointly significant, F(5,62)=4.058, p=0.003, with R²=0.247 and adjusted R²=0.186. A separate Cochrane-Orcutt lag diagnostic increases Durbin-Watson from 1.194 to 1.820, but the source thesis does not report the corrected coefficients for that specification. Social disclosure is the ESG dimension most consistently associated with lower borrowing costs in the reported model. The short sector-specific panel, disclosure-based measures, accounting cost-of-debt proxy, and incomplete corrected-regression output constrain the causal interpretation. This study adds Indonesian energy sector evidence by separating ESG pillars and distinguishing source-reported Ordinary Least Squares (OLS) results from autocorrelation correction.

Keywords

Cost of Debt Energy Sector ESG Disclosure Social Disclosure Sustainable Finance