Independent Investment: Investor Interest In ESG Labeled Investment Products Very High

Photo: Doc. Independent Investment

JAKARTA - PT Mandiri Investment Management (Mandiri Investasi) believes that investment products that prioritize the principle of concern for the environment, social and prudent management (environmental, social & governance / ESG), will be increasingly attractive to investors. This is in line with the increasing concern of the government, business actors and the community towards efforts to reduce carbon gas emissions, which is targeted by the government to become net zero emissions by 2060.

Mandiri Investment President Director Aliyahdin Saugi, on the sidelines of the 20th CFA Society Indonesia Conference in Jakarta, Thursday, July 6, said that in terms of investment products, especially mutual funds labeled ESG, industrially there was a significant increase in managed funds (AUM).

If in 2018, the total AUM of ESG-themed mutual funds amounted to Rp28 billion, the amount increased in 2020 by Rp480 billion and this year it has reached Rp630 billion. With an average growth of around Rp100 billion - Rp200 billion per year.

In addition, an increase can also be seen in ESG mutual fund products issued. In 2020, there were only 5 mutual fund products, the number continued to increase until the first semester of 2023, ESG-themed mutual funds reached 21 mutual funds. The increase in managed funds was mainly triggered by higher yields/return rates compared to non-ESG mutual funds.

"For example, the results of the Mandiri FTSE Indonesia ESG Index mutual fund which we launched last year, recorded a return rate of up to + 7 percent, compared with the negative JCI performance (-5 percent) in the same period," said the man who is familiarly called Adi.

The Independent Mutual Fund of the FTSE Indonesia ESG Index is the first mutual fund in Indonesia, which uses the FTSE Indonesia ESG index as a reference. The main advantage of the Independent Fund for the Indonesian ESG FTSE Index compared to other mutual fund products is that this mutual fund provides a return / return on investment returns equivalent to the performance of the FTSE Indonesia ESG Index which has a very good performance.

In addition to excellent returns relative to other indexes, there is no risk in the form of sector rotation in the market or active risk allocation in this mutual fund. This mutual fund is also designed not to have excess exposure in certain sectors. Moreover, the FTSE ESG index is only rebalanced once a year," said Adi.

Moving to stock performance, based on 2016-2021 data, the FTSE Indonesia ESG index published by FTSE Russell, recorded a growth in the highest share price of 57.56 percent. Much higher than the growth in the LQ 45 index which contains blue chip stocks, amounting to 38.11 percent, and the growth in the IDX30 index of 41.49 percent.

Likewise in debt securities instruments, investor concern for ESG aspects, one of which is reflected in the high interest in environmentally friendly bonds (Green Bond) issued by Bank Mandiri, recently. In fact, in the book building period which ended on June 4, 2023, there was an oversubscribed excess of 3.74 times. With the bid value reaching Rp. 18.7 trillion from the target of Rp. 5 trillion.

Responding to the high interest of business actors and investors in the ESG aspect, the Financial Services Authority / OJK as the regulator plans to issue OJK regulations related to the Carbon Exchange in the near future. In fact, in its official statement, the OJK is optimistic that the carbon market can operate this year.

The increasing number of capital market instruments that care about ESG is in line with the wishes of professionals in the investment sector who are members of the CFA Society Indonesia. Chairman of the CFA Society Indonesia Pahala N. Mansury emphasized that the non-profit organization he leads is ready to support the government's commitment to achieve net zero emissions (NZE) no later than 2060.

"We at CFA Indonesia are committed to supporting NZE launched by the government, by encouraging the active role of business actors and the public. The Ministry of SOEs is also pushing for the realization of a road map to support NZE," said Pahala, who is also the Deputy Minister of BUMN I, at a conference held by the CFA Society Indonesia.