Abstract
Amidst increasing sustainability challenges in developing economies, this research analyzes the impact of CSR, environmental performance, and good governance on the financial performance of firms. Firms in Indonesia and Malaysia are being pushed to adjust their strategies to match market and institutional expectations for ESG disclosure, which drives this investigation. Examining whether management techniques, in the form of Human Capital Investment techniques (HCIS), enhance this link and determining the direct consequences of the ESG dimension on financial performance are the primary goals of this research. The study employed the partial least squares structural equation modeling (PLS-SEM) to assess the hypotheses using panel data from public enterprises in Indonesia and Malaysia from 2020 to 2024. Results reveal a moderate direct influence for CSR and governance metrics, but a strong and statistically significant relationship for environmental performance and market-based performance (PBV). Companies that invest in staff training have a greater chance of translating environmental efforts into more accurate market evaluations, and HCIS significantly mitigates the relationship between environmental performance and PBV. Stakeholder and Legitimacy Theory explain that ESG participation enhances market legitimacy, while the Resource-Based View accounts for these findings, suggesting that human resources are strategic capabilities in integrating sustainability. In summary, the findings demonstrate that it has become strategically prudent to integrate sustainability initiatives with HR development. Implications: The findings of this study are relevant to business leaders and policymakers in developing countries seeking sustainable governance, employee engagement, and the generation of long-term value.