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The Chairman of the Indonesian Employers Association (APINDO), Shinta Kamdani, stated that effective ESG implementation not only enhances a company's image and value but also provides significant financial benefits.

“ESG is not only important for investors but also for companies, particularly in investment decisions that correlate with business development, as demonstrated by the company’s operations,” said Shinta at the Main Hall of the Indonesia Stock Exchange (BEI) on Monday (22/7/2024).

She explained that ESG is closely related to the business transformation carried out by companies because it directly contributes to the Sustainable Development Goals as a reference for global objectives. This is because ESG uses a rating system employed by companies to measure performance in three areas: environment, social, and governance.

According to Shinta, ESG can create long-term value to build a more sustainable and prosperous future because it relates to how companies implement SDG into their operations and investment decisions.

“ESG can also follow the business performance risk measurement, and ESG indicators can affect investment performance within the company, thereby helping to improve sustainability performance, management, and risk-return policies,” she added.

However, it cannot be denied that companies still face various challenges in implementing ESG criteria. For example, awareness and understanding, as well as limited resources and business culture infrastructure focused on short-term goals.

“The implementation of criteria generally requires additional costs and resources, such as for employee training, system development, and audits. Companies, especially SMEs, can be burdened with limited costs and resources to implement ESG,” she said.

Shinta mentioned that efforts to increase understanding and encourage ESG implementation need to be carried out comprehensively involving various parties. This is in line with efforts to establish ESG-based sustainable development investments by integrating cooperation and collaboration among investors, cooperatives as the private sector, and financial institutions.

“In the national context, as the umbrella of the business and industrial sector in Indonesia, it plays a crucial role. Recognizing the importance of ESG understanding, we have proactively encouraged carbon trading, sustainable development goal trading, ESG trading, and the development of environmentally-based businesses through our sustainability working group,” she explained.

Data released by the Harvard Law School of Corporate Governance in 2022 shows that 26 percent of global investors agree that ESG is at the core of their investment approaches and decisions. Overall, this increases the use of global ESG to 89 percent, up from 84 percent in 2021.

Meanwhile, research from The Economist Intelligence Unit on sustainable financing noted that as many as 161 investors and 154 issuers across the Asia-Pacific region, with 68 percent of investors and 63 percent of issuers implementing sustainable investment and financing, have better performance than equivalent traditional investments. Even in the national stock market, ESG has also proven to correlate with higher returns.

source : https://money.kompas.com/read/2024/07/22/211000326/kata-ketua-apindo-soal-implementasi-esg