Promoting Sustainable Investment in

Indonesia Capital Market

Hasan Fawzi
Director of Business Development
Indonesia Stock Exchange
20 May 2021
Why We Need to Care About ESG?

Because we care Sustainable practices affect Rising awareness of ESG issues in

better financial performance investment decision

▪ 88% of the research shows that solid ESG ▪ Principles for Responsible Investment
practices result in better operational 3,038
performance. 120 3,250
3,000
100 2,372 2,750
https://www.unpri.org/ 1,951 2,500
▪ 80% of the studies show that stock price 80 1,714 2,250
1,384 1,501 2,000
performance of companies is positively 60 1,750
1,500
influenced by good sustainability practices 40 1,250
1,000
750
20 500
59 62 68.4 81.7 86.3 103.4 250
(Clark, Feiner, and Viehs - 2014) 0 0
2015 2016 2017 2018 2019 2020
Assets under management (US$ trillion) Number of Signatories

▪ Combine the findings of about 2,200

studies, roughly 90% of studies find a ▪ CFA Institute Practitioner Survey, March 2020
nonnegative ESG–financial
performance relation. Large majority of
studies reports positive findings.

▪ Positive ESG impact on CFP appears

stable over time.

(Friede, Busch, and Bassen - 2015)

Source: Future of Sustainability in Investment Management: From Ideas to Reality (CFA Institute, 2020)

2
Increasing Demands in ESG Related Domestic Funds

AUM
No. ESG Related Index Fund and ETF
(IDR billion)
3,500 16
15
14 1. REKSA DANA INDEKS BNI AM ETF MSCI ESG LEADERS
766.3
14 INDONESIA
3,000
2. REKSA DANA PREMIER ETF SRI KEHATI 470.4
12 3. REKSA DANA INDEKS BATAVIA SRI KEHATI ETF 400.7
2,500
10 4. Reksa Dana Indeks RHB SRI KEHATI Index Fund 300.4
10
5. Reksa Dana Indeks BNP Paribas Sri Kehati 265.0
2,000
6. Reksa Dana Indeks Panin Sri Kehati 244.2
8
7 7. REKSA DANA INDEKS INSIGHT SRI KEHATI LIKUID I SRI
1,500 196.2
LIKUID
6
8. Reksa Dana Indeks Simas Sri Kehati 82.3
1,000 9. REKSA DANA INDEKS PREMIER ETF FTSE INDONESIA ESG 15.5
4
10. REKSA DANA INDEKS STAR ETF SRI KEHATI 9.5
2
500 11. REKSA DANA INDEKS SAM ETF SRI KEHATI 6.3
2
1 1 1
12. REKSA DANA INDEKS DANAREKSA ETF MSCI INDONESIA
4.7
38 36 42 253 730 1,776 3,062 2,695 ESG SCREENED
0 0
2014 2015 2016 2017 2018 2019 2020 Apr-21 13. REKSA DANA INDEKS AURORA ETF FTSE INDONESIA ESG 4.3
14. Reksa Dana Indeks Ayers Asia Asset Management Equity Index
2.6
AUM (Rp Miliar) No. of Products Sri Kehati
15. REKSA DANA INDEKS SYAILENDRA ETF MSCI INDONESIA
1.7
ESG UNIVERSAL INDEX
source: reksadana.ojk.go.id
3
The Ecosystem of Sustainable Finance in Indonesia
Policy; developing various Awareness; through developing a
policies to support sustainable communication strategy for sustainable
finance. finance initiative to reach out to financial
industry and related stakeholders.

Products; developing various Human Resources; developing internal

types of sustainable financial and external capacity through massive and
products and services. structured capacity building programs.

Market Infrastructure; Non-governmental Support; support from

developing technology and
information infrastructures
supporting sustainable finance.
Coordination among related Ministries/
Institutions; improving coordination and
exchange of information among
ministries/institutions and other
stakeholders.
the supply and demand side, research
(experts, research centers, and universities),
and international institutions as well as
membership in international forums for
further development of sustainable finance
Initiatives.
Source: Roadmap Keuangan Berkelanjutan Tahap II (2021 – 2025), OJK

4
Sustainability Report is Gradually Mandated for
Publicly Listed Companies
OJK Regulation No. 51 - 2017:
Implementation of Sustainability Report Obligation for
Financial Services Institutions, Issuers, and Public Companies

Reporting
Sustainability Report Period

Big Banks1 2019

Principles:
1. Responsible investment;
2. Sustainable business
strategies and practices;
3. Management of social and
environmental risks;
4. Governance;
5. Informative communication;
6. Inclusive;
7. Priority sectors development;
8. Coordination and
Collaboration.
Source: The KPMG Survey of Sustainability Reporting, Dec 2020
Medium & Small Banks2,
2020 Growth of ESG Reporting by S&P 500 Companies
Big PLC (Assets > IDR 250 Bn)
Medium PLC
(IDR 250 Bn > Assets > IDR 50 Bn ) 2022
Source: Governance & Accountability Institute, 2020
Small PLC (Assets < IDR 50 Bn) 2024
Staying silent is no
1. BUKU 3, BUKU 4, and Foreign Banks longer an option
2. BUKU 1 and BUKU 2

5
 Walk the Talk: IDX Consistently Promoting the Implementation
of ESG in Indonesia Capital Market
PROMOTING GCG IN INTERNAL PRACTICES EDUCATE STAKEHOLDERS
IDX supports Good Corporate Governance in internal process by
IDX promotes Sustainable Finance Literacy and Inclusion to
maintaining Management System Certification:
the Stakeholders by collaborating with OJK, AEI, ICSA,
• ISO 9001 – Quality Management System,
ICSA and other institutions.
• ISO 27001 – Information Security Management and
• Year 2017 : 5x Seminars
• ISO 22301 – Business Continuity Management.
• Year 2018 : 11x Seminars
• Year 2019 : 10x Seminars
• Year 2020 : 4x Webinars
PROVIDE INFRASTRUCTURE
(MARKET AND PRODUCTS)
IDX develops market and products to implement Sustainable Finance
through:
1. Facilitate SMEs listing: Acceleration Board
2. Support Development of SMEs and
Start Ups in Indonesia : IDX Incubator
3. Listing of Green Products : ACCESS OF INFORMATIONS
Green Bonds, ESG Related ETF
4. ESG Equity Index as Investment Benchmark: IDX Join SSE IDX increase transparency and reduce asymmetric
IDX ESG Leaders Index, SRI-Kehati Index April 2019 information for the investor through:
1. Electronic reporting & integrated System
(SPE-IDXnet)
2. Promote Green Reporting & Filing through Listing & IPO
ENGAGE STAKEHOLDERS TO IMPLEMENT Filing Integration through SPRINT
SUSTAINABLE FINANCE 3. Special Notations (ABCD.X)
4. ESG Scoring (Provide by Sustainalytics)
IDX engage various stakeholders through :
1. Build strong relationship and collaboration with related institutions
(SSE, GRI, KEHATI Foundation, Sustainalytics, IBCWE, TCFD,
Ring the Bell for Gender Equality)
2. Incentives for Green Bonds listing
3. Appreciations for the Stakeholders : Annual Report Award,
ASEAN Corporate Governance Scorecard
6
IDX has fulfilled all Stock Exchange Sustainability Activities
in Sustainable Stock Exchange Initiatives (SSE)
Stock Exchange Sustainability Activities Fulfillment
SSE Partners Exchanges Yes
SME listing platform Yes
Acceleration Board
Training on ESG topics Yes
Providing written guidance on ESG Yes
reporting - OJK Regulation 51
2017
- Technical Guidelines
for Banking Sector
Publish Sustainable Reports Yes
Covered by an ESG Index Yes
- SRI-Kehati Align with WFE Sustainability Principles (2018):
- IDX ESG Leaders
1. Create sustainability understanding.
ESG Bond segments Yes 2. Help normalize and mainstream ESG data.
Green Bonds 3. Actively engage with broad stakeholder group.
Mandatory ESG listing requirement Yes 4. Create sustainable (and scalable) products.
Sustainable Report 5. Manage ESG responsibly in-house.

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IDX Supports ASEAN Corporate Governance Scorecard (ACGS)
Historical Country Score ACGS, 2012-2019
The ASEAN Corporate
Governance (CG) Initiative was Countries/Year 2012 2013 2014 2015 2017 2019
introduced in 2011 to raise CG 1. Thailand 68 75 85 87 85 97
standards and practices of 2. Malaysia 63 72 75 77 82 95
ASEAN public-listed companies 3. Singapore 56 72 71 78 78 88
(PLCs) and to give greater 4. Philipine 49 58 67 73 67 77
international visibility to well- 5. Indonesia 43 55 57 62 70 71
governed ASEAN companies. 6. Vietnam 28 34 35 36 41 55

The initiative’s objectives are:

• to raise the corporate governance standards
and practices of ASEAN PLCs.
ASEAN Asset Class 4. PT Aneka Tambang Tbk
5. PT Bank Mandiri (Persero) Tbk
• to give greater international visibility to well- 1. PT Bank CIMB Niaga Tbk 6. PT Bank Central Asia Tbk
governed ASEAN PLCs and showcase them 2. PT Bank Tabungan Negara 7. PT Bank Permata Tbk
as investable companies, and (Persero) Tbk 8. PT Jasa Marga (Persero) Tbk
• to complement other ACMF initiatives and 3. PT Bank Rakyat Indonesia 9. PT XL Axiata Tbk
(Persero) Tbk 10. PT Bank Maybank Indonesia Tbk
promote ASEAN as an asset class.

Now there are six countries Significantly Improved PLCs

participate in ACGS:
Indonesia, Malaysia, the 1. PT Elang Mahkota Teknologi Tbk
Philippines, Singapore, 2. PT Vale Indonesia Tbk
Thailand and Vietnam 3. PT Adaro Energy Tbk

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ESG Related Indices

IDX ESG • ESG Integration approach; Index growth

Leaders • Consist of 30 stocks
• Leaders in ESG rating;
180
• Do not have significant controversy;
• High trading liquidity;
• Good financial performance; and 160
• ESG assessment and controversy
analysis is done by Sustainalytics. 140

120
SRI-
• ESG Screening approach;
KEHATI* JCI Index (137.76)
• Consist of 25 stocks; 100
• Good performance in encouraging LQ45 Index (123)
sustainable businesses; SKEHATI Index (142.91)
• Have awareness of the environment, 80
IDX ESG Leader Index (131.55)
social, and good corporate governance;
and 60
•

Dec-14

Dec-17

Dec-18
Dec-15

Jun-16

Dec-16

Jun-17

Jun-19

Dec-19

Jun-20

Dec-20
Jun-14

Jun-15

Jun-18
Feb-16

Feb-19
Feb-14

Feb-15

Feb-17

Feb-18

Feb-20

Feb-21
Aug-14

Aug-17

Aug-20
Oct-14

Aug-15

Aug-16

Oct-17

Aug-18

Aug-19

Oct-20
Oct-15

Oct-16

Oct-18

Oct-19
Apr-16

Apr-19

Apr-20
Apr-14

Apr-15

Apr-17

Apr-18

Apr-21
Assessment and selection is done by
*SRI-KEHATI is a
jointly developed index
KEHATI Foundation.
with Indonesian
Biodiversity Foundation
(KEHATI Foundation). Source: IDX, Bloomberg
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ESG Scoring and IDX ESG Leaders Index

Investment
Decision
ESG Risk Rating
ESG Rating
Provider
Listed
Companies

(Currently IDX80
companies)

Global &
New ESG Indices Local Fund
IDX ESG Leaders Index
Invest in
Indonesia
Capital
Companies Fund Manager Market
Improve their create Products
ESG practices ETF / Mutual Funds

10
More Initiatives to be Done in 2021 - 2025

Toward more
Sustainable
Investment in
Indonesia
Capital
Market

Strengthening Risk Accelerate the Transition

Management and GCG in of Financial Sectors to
Social and Environment Adopt Sustainable
Aspects Finance

11
Promoting Sustainable Investment in
Indonesia Capital Market