Does SDG Performance Lead to Higher Financial Performance: Case of Dow Jones Islamic Market World Index Heavy Industry Sector Firms

The global society has been facing many issues and challenges that require urgent attention. One innovative global solution is the introduction of the Sustainable Development Goals (SDGs). The private sector is a key stakeholder using resources from the society to satisfy corporate interests, and it is the sector’s responsibility to ensure and protect the well-being of the society in return, by taking an active role to accelerate the implementation and execution process of the SDGs to be achieved by 2030. Therefore, there is a high expectation from the private firms to contribute to the SDGs agenda. The aim of this study is to analyze the impact of the SDGs environmental scores on firms’ financial performance. A total of twenty-five industrial listed firms from the constituents of Dow Jones Islamic Market World Index has been analyzed in this study. As of the study’s findings, it shows that a higher score of SDGs environmental performance leads to a higher ROA and ROE in the sampled firms. The study recommends that firms could achieve higher financial performance by improving their resource use, increasing corporate innovation and reducing CO₂ emissions. This study has policy implications for both companies and regulators.