ESG-Based Issuers Potentially Sustainable Business Growth

ESG illustration (photo: dock. Unsplash)

JAKARTA - A public company that applies Environmental, Social, and Governance (ESG) principles has the potential for sustainable business growth.

Director of PT Infovesta Utama (Infovesta) Parto Kawito said that companies implementing ESG practices generally not only focus on their shareholders, but also various wider stakeholders.

"So that the company becomes trusted and eventually attracts more customers which leads to a positive increase in the company's performance," said Parto quoting Antara.

Parto explained that the strong and sustainable growth of ESG-based companies can be seen from the growth of its stock index, which far exceeds the Composite Stock Price Index (IHSG), as well as LQ-45 and Kompas 100 shares.

Of the four indexes that are indicators of ESG companies, the highest growth is in the 45 shares of ESG IDX Kehati and the Sri Kehati Index, which grew 10.13 percent and 9.16 percent in one last year, until June 16, 2023, respectively.

Then, the IDX Kehati ESG Sector Leaders index grew by 6.9 percent and the IDX ESG Leaders grew by 3.24 percent, in the last year, until June 16, 2023.

Meanwhile, in the same period, the JCI and LQ-45 shares were recorded at minus 4.99 percent and 6.46 percent, until June 16, 2023.

Parto said ESG-based company business growth helped encourage ESG-based mutual fund products, which recorded positive returns, which were an average of 12.6 percent, compared to the return of non-ESG mutual funds of 1.27 percent.

Currently, there are a total of 33 ESG-based mutual fund products, with a total managed fund of IDR 4.8 trillion or the largest mutual fund product.

However, Parto assesses that investment in ESG-based companies still lacks awareness, plus the limitations of the ESG-based company itself.

Thus, he considered the need for more support from various parties, including regulations from the government and related authorities so that more ESG-based companies offer their shares in the capital market.

On the same occasion, Fund Manager Equity Sucor Asset Management Alexander Yasa said, through the ESG approach, business and investment decisions not only pay attention to financial benefits, but also consider the impact on the environment and social.

"Encouraging a sustainable economy in Indonesia has become our common goal, and sustainable investment is one of the tools to get us there (a sustainable economy)," said Alexander.

Director of Finance and Administration of the Indonesian Biodiversity Foundation (HEHATI) Indra Gunawan appreciated the positive trend of ESG-based investment in recent years.

"The ESG concept is specific and data-based, so it is useful for investors who want to see factual evidence that a company is doing what it says is sustainable," said Indra.

The Indonesia Stock Exchange (IDX) noted that the market capitalization of 70 ESG issuers in the Indonesian capital market controlled 56.87 percent of the total market market capital or IDR 5,407 trillion.