Responsible economic growth is an integral part of the goal of sustainable development. The transition to sustainable development needs to be based on a change in the mindset of business actors that business activities will be better and more sustainable if they pay attention to social, environmental and governance aspects (ESG). To accelerate the transition to a sustainable economy, OJK has recently issued the Sustainable Finance Roadmap Phase II (2021-2025), which focuses on ESG-based business development. This paper seeks to examine the comparison between the sustainability reporting obligation under the OJK Roadmaps with global ESG instruments, including United Nations Principles for Responsible Investment (UNPRI), Global Reporting Initiative (GRI), the European Union Directive on Non-Financial Reporting 2014, EU Regulation 2019, French Energy Transition Law and to analyse whether OJK Roadmap II has accommodated the interest of global investors in light of ESG Investment, particularly reliable ESG reporting obligation by companies listed in the Indonesia Stock Exchange. It will conclude with a comprehensive evaluation of aspects needed to be improved by the existing Roadmap II to increase ESG investment in Indonesia.
ESG investment policy in Indonesia, which specifically regulates sustainability reports, namely the OJK Regulation on Sustainable Finance, still lacks behind when compared to international ESG regulations/standards. In terms of reporting targets, the OJK Regulation is only limited to financial services institution, issuers, and public companies, while most international ESG regulations have a wider scope, including their applicability to direct investment and small and medium enterprises. In terms of substance or content, there are several international ESG standards that have not been covered in the OJK Regulation, namely the human rights due diligence obligations, supply chain policy standards, and the determination of KPIs for each ESG indicators. Furthermore, the Roadmap II OJK only emphasizes on how
companies can be eased in fulfilling their reporting obligations, and investors can be eased in accessing information about ESG, but it does not solve the main issue on the lack of ESG standardization/indicators based on the OJK Regulation on Sustainable Finance, which in the end may reduce the trust of global ESG investors towards companies in Indonesia.
Author: Iman Prihandono, S.H., M.H., LL.M., Ph.D.
Journal:Indonesia Sustainability Reporting Standard: What Needs to be Improved?
