THE MEDIATING ROLES AND IMPACT OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ON BUSINESS FINANCIAL PERFORMANCE IN MALAYSIAN BUSINESSES

Abstract

The primary objective of this research study is to assess the influence of environmental, social, and governance (ESG) factors in the financial sector on performance outcomes in Malaysia. The concept of Environmental, Social, and Governance (ESG) is undergoing a significant transformation in the contemporary business landscape, exhibiting a dynamic and ever-changing nature. The trend is driven by the increasing apprehensions of investors and stakeholders who are not solely focused on financial gains, but also prioritize societal benefits. The stakeholders express a need for enhanced disclosures pertaining to ESG matters, with the intention of gaining a comprehensive understanding of the company's operational framework, decision-making processes, and value creation mechanisms. ESG, pertains to conducting company operations in a manner that demonstrates respect for both individuals and the environment, while also prioritizing ethical profit generation. Ensuring the ability of enterprises to conduct their activities in a sustainable way holds significant importance. A sustainable company strategy has the potential to enhance productivity through the elevation of staff motivation and loyalty, as well as the facilitation of talent attraction and retention. There is a growing body of evidence that supports a positive correlation between sound corporate practices and financial performance, indicating the existence of an ethics premium. The integration of environmental, social, and governance factors has emerged as a significant and influential trend in the business world, contributing to the successful attainment of a firm's goals and objectives. There is a prevailing argument that companies engage in their activities with the objective of attaining financial benefits. However, contemporary corporations have also become cognizant of the non-financial rewards that can be obtained by the organization over an extended period.