Fredericho Mego Sundoro, Rahma Puspita Rahayu, Elma Yoencha Thine, Fita Amalia Nur Aini, Maya Indah Sulistyowati
In this increasingly complex modern era, sustainability and social responsibility have become crucial elements in assessing the success of a country. The social and environmental roles also define the country's representation, thus the existence of the Environmental, Social, and Governance (ESG) concept becomes important. This research is conducted to investigate the effect of ESG variables towards economic growth among ASEAN countries from 2002-2020. The macroeconomic variables include Inflation, FDI, and GDP growth; CO2 Emissions as the environment indicator; Human Development Index (HDI) and Labor Force Participation Rate as the social indicators; and government indicator explained by Government Effectiveness Index. This paper considers the regional clusterization of 10 countries in ASEAN to recognize the pattern of those macroeconomic variables along with ESG variables. In order to achieve our aims, this research applies Vector Error Correction Model (VECM). The VECM is particularly suitable for this study due to its ability to handle non-stationary time series data while allowing for the exploration of both short-term and long-term dynamics between the variables. By including macroeconomic indicators, we can better isolate the specific effects of ESG variables on growth. The results from the VECM will be interpreted to understand both the immediate and gradual impacts of ESG initiatives on economic development in ASEAN countries. The analysis begins with unit root tests to confirm the stationarity of the data, followed by cointegration tests to establish long-term relationships among the variables. Finally, the VECM will be estimated to quantify the impact of ESG factors on economic growth with controlling for macroeconomic variables. Model quantitative research with secondary data from 2002-2020. The empirical results indicate that in the long term, CO2 emissions positively affect GDP, while FDI, the Government Effectiveness Index, Inflation, and Labor Force Participation Rate have negative effects, though HDI's positive effect on GDP is statistically insignificant. In the short term, significant influences on GDP include its values from the previous two periods and HDI from one period ago. © 2025 Institute of Physics Publishing. All rights reserved.
Department of Development Economics, Faculty Economics and Business, Universitas Negeri Semarang, Semarang, Indonesia
