ESG Dimensions and the Energy Transition in Indonesia

Abstract

Environmental, social, and governance (ESG) factors are critical determinants of a just and sustainable energy transition. This study employs the Autoregressive Distributed Lag (ARDL) approach to examine the impact of ESG performance on Indonesia’s energy transition from 1996 to 2022. The findings reveal that in the short term, governance positively influences the transition, while environmental and social dimensions exhibit temporary negative effects. However, in the long run, all three ESG dimensions of environmental integrity, social development, and governance quality positively contribute to the shift toward clean energy. These results underscore the need for Indonesian policymakers to prioritize ESG integration in energy strategies to ensure a smooth, inclusive, and resilient energy future.