Stakeholder theory studies the role of various parties with vested interests in a company (Osei et al., 2023). This theory asserts that businesses are not only responsible for generating profits through their operations but also for providing benefits to both internal and external stakeholders (Chang et al., 2024). According to this theory, environmentally conscious companies, particularly regarding greenhouse gas (GHG) emissions, and allocate resources for environmental initiatives can enhance stakeholder trust by prioritizing transparency, accountability, and sustainability. Furthermore, (Indriastuti & Chariri, 2021) emphasized that stakeholders play a crucial role in ensuring strong environmental performance. Therefore, companies that embrace sustainable practices can attract investors for GI, improve their reputation, and mitigate legal risks associated with environmental pollution.

The theory states theoretical frameworks for understanding the relationship between green investment, green financing, CSR, and sustainable FP (Acquah et al., 2023). Industries that adopt green accounting and sustainability practices are better equipped to assess their environmental impact and develop long-term strategies that benefit stakeholders (Hörisch et al., 2020). Companies can achieve sustainable performance while enhancing their competitive advantage by considering stakeholder interests, including those related to environmental management and sustainability (Evans et al., 2017). In Indonesia, approximately 70% of companies have disclosed their stakeholder engagement efforts in their sustainability reports. Stakeholder involvement plays a role in guiding companies' sustainability considerations throughout their value chains (PwC, 2023).

Currently, environmental pollution and the increasing globalization of greenhouse gas (GHG) emissions resulting from industrial activities are gaining more attention from industries and governments worldwide. Companies across various countries are making efforts to address environmental issues by disclosing carbon emissions generated from their business activities (Ramadhan et al., 2023). CED also helps bridge the information gap between management and investors, enabling more efficient resource utilization (Ramadhan et al., 2023). According to (Trinks et al., 2020) and (Trinks et al., 2020), as carbon emission costs become more expensive, companies with low-carbon production technologies gain a competitive advantage over those with higher carbon-intensive technologies.

A high level of carbon efficiency can influence profitability, reflecting the extent to which resources are used efficiently (Trinks et al., 2020). In stakeholder theory, investors support CED as they think about environmental factors and good corporate governance in their decision-making. CED can enhance FP and increase firm value (Luo & Tang, 2016). Research conducted by (Andrian, 2020) and (Siddique et al., 2021) suggested that CED affects FP. (Ganda & Milondzo, 2018) revealed that Scopes 1,2, and 3 CED have different effects on FP, as measured by ROE, ROI (Return on Investment), and ROS. Therefore, the hypothesis testing is formulated:

H1: Carbon Emission Disclosure Affects Financial Performance.

Currently, environmental sustainability is a major concern for governments and industries worldwide. One way to support environmental sustainability is investing in or allocating funds for sustainable and eco-friendly projects. Although GI may lead to increased expenditures for environmental pollution control, when aligned with proper regulations, it can also serve as a catalyst for green economic growth (He et al., 2019). GI represents a company's environmental responsibility toward internal and external stakeholders (Indriastuti & Chariri, 2021). In line with stakeholder theory, companies that allocate funds for eco-friendly projects demonstrate their commitment to environmental preservation. For investors, GI can also enhance competitive advantage (Chen & Ma, 2021). Specifically, the mining and energy subsectors can leverage GI to gain a competitive edge and attract investors by utilizing renewable energy and improving energy efficiency to reduce carbon emissions. The results of the study suggested that GI influences FP, proving that its implementation can lead to financial improvements ((Indriastuti & Chariri, 2021); (Siedschlag & Yan, 2023); (Chen & Ma, 2021)). Based on the explanation, the hypothesis testing is formulated:

H2: Green Investment Affects Financial Performance

GI refers to corporate investments aimed at supporting environmental sustainability, reducing carbon emissions, and improving resource efficiency. According to stakeholder theory, stakeholders influence strategic decision-making regarding social and environmental responsibility. Referring to the theory, managers make strategic decisions and allocate resources in alignment with the demands of stakeholder groups (Maharani et al., 2023). Funding GI that sources from companies, private entities, international organizations, banks, and governments, can often be green bonds. Companies that allocate capital toward GI are expected to contribute to energy consumption control, carbon emission reduction (Zheng & Jin, 2023), and the development of renewable energy to sustain the planet and environmental sustainability. Research by (Zheng & Jin, 2023) stated that increased GI influences carbon emission disclosure while (Maharani et al., 2023) suggested that GI positively impacts CED, with political connections serving as a mediating variable. Based on the explanation, the hypothesis testing is formulated:

H3: Green Investment Influences Carbon Emission Disclosure.

The study focuses on mining and energy companies due to their direct involvement with natural resources and their impact on environmental pollution and sustainability policies. The data used annual and sustainability reports. The population included mining and energy subsectors listed on IDX from 2018 to 2023. The sampling employed a purposive technique, resulting in a total sample of 162 observations from 27 companies. The criteria of sample selection are based on these two items:

Multiple Linear Regression Equation

Model 1

FPit= α+β1CEDit+ β2GIit+eit

Model 2

CEDit= β1GIit+eit

Table 2 shows that CED and GI affect the FP of mining and energy companies for the 2018–2023 period. The determination test (R²) produced a value of 0.096. It indicates that the variations in independent variables state only 9.6% of the FP while the remaining 90.4% are affected by other variables, not covered in the model. For the Goodness of Fit (F-test), the results show a significant value of 0.000, below 0.05. It indicate the independent variables simultaneously affect the dependent variable. In other words, any changes in CED and GI together have an impact on FP.

Based on the hypothesis testing, the probability value of CED (0.000) is lower than α (0.05), indicating that CED has a positive impact on FP. It states that CED can influence a company's FP, as reflected in investor and market responses. This finding aligns with stakeholder theory, stating that improving a company’s value through FP can be achieved by considering environmental factors. Currently, stakeholders are highly concerned with how companies take their social and environmental responsibilities. Moreover, companies with high profits and large-scale operations tend to find it easier to report carbon emissions.

Research shows that the higher a company's compliance with applicable regulations, the more likely it is to disclose carbon emissions (Rohmah et al., 2022). (Trinks et al., 2020) found that companies with high carbon efficiency can perform better in short-term operations and gain a competitive advantage in capital markets by systematically reducing environmental risks. The result of the study revealed that Scope 3 emissions (indirect emissions) significantly impact FP, as measured by ROE (Emmanuel et al., 2023). However, it is recommended that management, investors, and relevant stakeholders focus on the emissions of both Scope 1, 2, and 3. Companies with high ROE generate more revenues, and their free cash flow can be used for driving further growth, maintain financial stability, and provide returns to shareholders (Ahsan, 2012).

Based on the hypothesis testing, the probability value of GI (0.030) is smaller than α (0.05), indicating that GI positively affects FP. Implementing GI serves as a long-term strategy to enhance FP. While GI can influence a company's financial outcomes, its impact often requires a considerable amount of time to materialize. This is because it depends on factors such as available capital, stakeholder response, and the actual effectiveness of environmental initiatives in reducing pollution. GI is considered a long-term strategy because it involves environmentally friendly projects that naturally require a significant amount of time to take positive FP impacts. The effect of GI on improving FP is more significant as the investment period extends (Chen & Ma, 2021). Similarly, the study result by (Akbar et al., 2021) found that companies without stable FP can significantly enhance their market performance and accounting-based FP (ROA) through increased environmental protection investments. Furthermore, Diantini et al. (2023) suggested that companies with high ROE generally have better environmental performance.

GI plays a role in protecting our planet by reducing carbon emissions and preserving natural resources through environmentally friendly projects. GI is not only about establishing a corporate system that prioritizes sustainability performance, but it also offers a profitable solution by providing higher returns compared to companies that do not prioritize sustainability. Referring to stakeholder theory, companies must think about the interests of stakeholders, which can be achieved through GI. This approach not only addresses environmental concerns but also takes into account investors’ expectations for higher returns in the future. Thus, companies that successfully integrate environmental sustainability factors can create corporate value, which ultimately impacts FP. (Indriastuti & Chariri, 2021) stated that green investment and CSR investments in Indonesia's manufacturing sector can provide a positive perspective to the public, management, and investors as well. In environmental initiatives such as the use of renewable energy and transparent annual reporting, companies can contribute to carbon emission reduction during the production process.

Table 3 shows that during the pre-COVID-19 in the 2018–2019 period, CED had a value of 0.010, indicating a significant effect on FP, but GI had a value of 0.113, showing no effect on FP. During the COVID-19 of 2020–2021, CED had a value of 0.014, indicating a significant effect on FP, whereas GI had a value of 0.063, indicating no effect on FP. In the New Normal and post-COVID-19 of 2022–2023, CED had a value of 0.276, indicating no effect on FP, and GI had a value of 0.466, also indicating no effect on FP.

The results of Table 3 indicate that CED has a significant positive effect on the FP of mining and energy. This finding suggests that annual carbon emissions or sustainability reports get a favorable response from the market. According to stakeholder theory, investors and consumers tend to prefer companies that make a high commitment to environmental sustainability. Given that mining and energy companies are directly involved in the extraction of natural resources, they are also expected to take responsibility for environmental management and conservation. This responsibility extends beyond financial profitability to include sustainable business practices that align with environmental and social expectations.

CED can also provide a competitive advantage in the future. However,(Siddique et al., 2021) revealed that CED negatively impacts both short-term and long-term FP. Similarly, (Ganda & Milondzo, 2018) stated that the CED of Scope 1 has a significant negative effect on FP (ROE), while that of Scope 2 has no impact on FP (ROE). The lack of impact from Scope 2 on FFP may be attributed to several factors. One key reason is that most stakeholders, particularly investors, are not as interested in indirect emissions (Ganda & Milondzo, 2018). This could be due to the limited control companies have over Scope 2, as the responsibility primarily lies with external parties. Additionally, companies investing in renewable energy may not experience an immediate or direct impact on their FP.

GI does not affect the FP of mining and energy companies. Out of the companies in the sector, only 27 reported their PROPER rating certificates from the KLHK. This indicates that many companies are not yet prepared to allocate funds for environmental investment. Eyraud et al. (2013) stated that GI is driven by economic growth, a well-functioning financial system with low interest rates, and high fuel prices. The successful implementation of GI also needs government support, particularly in financial policy developments such as green finance, to encourage companies to participate in sustainable investments. Green finance takes a role in supporting green investment, serving as a driving force for environmental sustainability initiatives. Financial support, particularly for eco-friendly projects, can significantly ease the implementation process for companies. Moreover, firms with strong financial health and high profitability are better positioned to take on their environmental responsibilities. However, the study results are different from those of (Indriastuti & Chariri, 2021), which revealed that GI positively impacts FP. Their research focused on manufacturing companies and was conducted before COVID-19 during the 2016–2019 period.

The hypothesis testing results in Table 4report that CED had a significant positive impact on the FP of mining and energy companies during the COVID-19 period. The broader the CED during this period, the greater the improvement in FP. Companies believed that prioritizing environmental aspects, such as greenhouse gas (GHG) emissions, during the COVID-19 crisis would not negatively impact their financial stability. Instead, they recognized that disclosing carbon emissions during the pandemic could enhance their legitimacy and corporate image among the stakeholders. This finding suggests that companies successfully attracted investor and stakeholder attention by demonstrating a strong commitment to environmental responsibility, even amidst financial uncertainty. Stakeholders believed that companies that truly care about the environment have the potential to generate competitive advantages in the future.

These research findings align with the study by Le & Nguyen-Phung (2024), which revealed that greenhouse gas (GHG) emissions have a significant negative impact on FP, as measured by ROA and ROE. Their further study analysed how reducing GHG intensity could increase firm value in Africa following the Paris Agreement. The Paris Agreement represents a global commitment by companies across various nations to emphasize environmental sustainability and contribute to SDGs achievement. Similarly, Secinaro et al. (2020) revealed that the European companies that comply with GHG reduction policies agreed with the Paris Agreement achieve higher FP growth. These findings suggest that GHG disclosure can influence FP. Companies that report total emissions, total energy consumption, and social and environmental management practices employ a proactive approach to transparency and accountability, that ultimately agrees with SDGs.

GI did not have a significant impact during the COVID-19 period due to financial constraints and the economic crisis caused by the pandemic. Developing or implementing environmentally friendly projects requires substantial funding as well as support from both the government and investors. The size of a company also plays a role in deciding whether it can invest in sustainable initiatives. Larger companies with higher revenues are generally in a better position to finance environmental projects. During the pandemic, economic instability led investors and companies to prioritize operational expenses over green investments. Similarly, governments allocated funds primarily to public health initiatives and short-term economic recovery efforts, rather than supporting long-term environmental investments.

According to (Akbar et al., 2021), companies experiencing a financial crisis that engage in environmental investments tend to suffer a decline in market performance. This indicates that companies facing financial difficulties are less likely to receive a positive response from the market and investors if they focus solely on GI. In reality, many companies implement sustainability initiatives to primarily keep their image and legitimacy in the stakeholders, rather than as a core business strategy. Tanjung (2023) revealed that after the COVID-19 period, ESG-focused companies did not gain significant benefits during the financial crisis of 2020–2021. The study also stated that in the early stages, the adoption of sustainable finance in the SRI-KEHATI and IDX30 sectors has taken more time to establish a supportive financial and regulatory environment.

The intensity of carbon emission disclosure by companies did not significantly impact the FP of mining and energy companies during the new normal and post-COVID-19 periods (2022–2023). After the COVID-19 pandemic, companies prioritized maximizing shareholder returns over CED. Additionally, CED requires support and accountability from both management and director board. However, corporate management and board committees have demonstrated limited responsibility toward environmental issues. As a result, stakeholders have not responded positively to corporate environmental performance (Daromes et al., 2020).

The mining and energy industries can make the largest contributors to carbon emissions. While carbon emission disclosure can help improve FP in the short term, the increase in FP remains relatively low (Lu et al., 2021). This also suggests that even though companies disclose their carbon emissions, the overall FP is not directly impacted (Ramadhan et al., 2023). Moreover, while CED has increased, they do not always correlate with a significant reduction in emissions. Therefore, companies need strategic policies to effectively reduce carbon emissions each year, particularly through green technology and innovation.

GI did not significantly affect the FP of mining and energy companies during the new normal and post-COVID-19 period (2022-2023). This may be because companies focused on restoring their financial stability after the pandemic. A study by (Chen & Ma, 2021), which used ROE as a metric, suggests that this phenomenon is driven by the prioritization of shareholder wealth and profit maximization. Shareholders often push companies to focus on short-term FP, particularly net profit growth, which can result in green investments having little to no immediate impact on FP. Additionally, evaluating the impact of green investments takes time, as their long-term benefits may not be immediately visible. However, GI remains a crucial factor for future financial and environmental sustainability.

Table 4 shows that GI with a value of 0.003 makes a significant impact on CED. The determination test (R²) produced an Adjusted R Square value of 0.046. It means variations in the independent variables state only 4.6% of the CED whereas the remaining 95.4% are affected by other variables, not covered in the model. For the Goodness of Fit (F-test), the result shows a significant value of 0.003, which is below 0.05.

The results of the test indicate that GI has a positive effect on CED. The implementation of GI can help reduce greenhouse gas (GHG) emissions. Environmentally friendly projects, such as renewable energy initiatives that utilize solar panels, contribute to reducing GHG emissions to be the main cause of global warming. Although CED in Indonesia has been voluntary, an increasing commitment to environmental sustainability has led many companies to transparently report their carbon emissions in sustainability reports. Furthermore, the OJK Regulation No. 51 of 2017 on the Implementation of Sustainable Finance for Financial Services Institutions, Emiten, and Public Companies encourages publicly listed companies to publish sustainability reports, covering aspects of social and environmental responsibility. This regulation is expected to enhance corporate transparency and accountability in addressing environmental concerns while fostering a more sustainable business environment.

According to stakeholder theory, companies disclose information by considering factors such as alignment with stakeholder interests and environmental threats (Maharani et al., 2023). GI refers to investments aimed at addressing climate change by reducing GHG emissions without significantly compromising production and consumption (Afni et al., 2018). GI can take various forms, including eco-friendly product innovations and green financing, both of which are intended to reduce carbon emissions. This is consistent with (Maharani et al., 2023), who suggest that environmentally friendly investments encourage companies to optimize green technologies without causing carbon emissions while adding value through the reduce, reuse, recycle, and recovery (4R) concepts. Therefore, it is crucial to have directors and executives who are committed to environmental sustainability to enhance the quality of CED.