Purpose This study aims to analyze the relationship of environmental, social and governance (ESG) score and cost of capital of Southeast Asian nonfinancial firms and how the quality of the legal system in Southeast Asian countries strengthens that relationship. Design/methodology/approach The study analyzes 490 firm-year observations across five representing countries in Southeast Asia (Indonesia, Singapore, Malaysia, Thailand and Philippines) using weighted least squares, random effects and fixed effects models. It is also specifically observed how the changes before, during and after COVID-19. Findings The study found a significant negative relationship between ESG scores and the cost of capital. The effect is stronger in countries with weaker legal systems, such as Indonesia, Thailand and Philippines, across all seven years of observation. In a more stringent time observation, observations before COVID-19 (2017–2019) agree to this relationship, while observations during the pandemic (2020–2021) did not. After COVID-19, observations (2022–2023) show that ESG effects on cost of capital are still partially present. Research limitations/implications The study’s classification of legal systems as “weak” or “strong” is relative to the Southeast Asian context, and broader regional comparisons may provide different insights for future research. Practical implications Policymakers can use these insights to promote ESG activities. In addition, by adopting ESG initiatives, companies not only improve financial outcomes but also contribute to addressing global challenges such as climate change, inequality and corporate governance. Originality/value This study moves the conversation forward by combining standard economic views on ESG and the cost of capital with more in-depth political and institutional critiques. It also looks at how ESG disclosures and practices relate to broader issues of legitimacy, power and responsibility in international business, incorporating different time periods, including the COVID-19 era.
Tarigan et al. (2026) studied this question.