ESG Challenges: How Green Performance Change the Game for Company‘s Market Performance

This study aims to fill the gap in the literature by examining the impact of green performance on market value. The research intends to prove whether a high green performance affects high market performance on the stock exchange. Based on signaling theory, companies that effectively manage and disclose their environmental performance can send positive signals to investors, potentially enhancing trust and market value. The Ministry of Environment launched an industrial performance rating evaluation program in environmental management called PROPER. In a 2011 press release, the Ministry of Environment explained that PROPER is an environmental compliance program for companies that is made public, allowing the community to evaluate companies’ performance in minimizing negative environmental impacts based on the PROPER rating achieved. According to the PROPER regulation issued by the Minister of Environment in Regulation No. 5 of 2011, the PROPER ratings are categorized as follows: Gold (5), Green (4), Blue (3), Red (2), and Black (1). These independent variables will be tested for their influence on the market value, measured by company’s value, to provide evidence that companies incurring costs to reduce environmental impact can still achieve profitability. Therefore, it is hoped that companies can contribute to environmental issues and global warming.