SUSTAINABLE FINANCE REGULATION TO SUPPORT SDG S€¦ · 1. Doctor of Philosophy (Ph.D)- Edith Cowan University, Perth, Australia 2. Certified Green Productivity Specialist – APO,

SUSTAINABLE FINANCE REGULATION TO SUPPORT SDGS

Sustainable Development Goals Symposium28 February 2020

Trisakti University

Juniati Gunawan PhD

1. Doctor of Philosophy (Ph.D)- Edith Cowan University, Perth, Australia 2. Certified Green Productivity Specialist – APO, Jepang3. Certified Green Finance Specialist – Renac, Germany4. Resource person and advisor for sustainable finance dan sustainability

report: The Financial Service Authority

Profile

Achievements1. Emerald Literati Award – Outstanding Author contribution 2. Top ten Best Lcturer in Indonesia3. Scholarship Asean Productivity Organization, Japan4. Scholarship Renewable Energy, Germany5. Scholarship Australia Award Indonesia – Outstanding

alumni

Scopus ID566 4140 1400

Researcher IDC-3369-2017

Orchid identifier0000-0001-9827-0866

• An advisor for Environmental & Social Risk ManagementProgram in Indonesia - the International FinanceCorporation (IFC, World Bank Group) for SustainabilityReporting, since 2015

• Director for Trisakti Sustainability Center, since 2009

LANDSCAPE ON SUSTAINABILITY POLICIES IN INDONESIA

Study conducted bySupported by


Background – Why Indonesia

■ Until the end of 2016, there is no clear policy or law regarding sustainability disclosure, only CSR in annual report.

■ Most of SMEs have not applied the concept of sustainability in their business activities. SMEs often think that sustainability is only relevant for large companies.

■ SMEs have 99.99% portion from the total of businesses in Indonesia or 56.54 unit (Bank of Indonesia, 2016)

■ SMEs contribute to GNP: 57.84% increase to 60.34% within 5 years. ■ Workforce for SMEs : from 96.99% increase to 97.22%■ However, SMEs in Indonesia only contribute 0.8% to global supply chain.

http://www.kemenperin.go.id/artikel/14200/Kontribusi-UMKM-Naik

Objective of the study 1. Identify and analyze the most important existing policies covering sustainability

reporting and their impacts on supply chains (Listed companies, Large companies,and SMEs)

2. Identify and document the most relevant policy actors that may be involved in the development of policies for sustainability reporting, specifically for SMEs

3. Identify and analyze the most important existing policies for broader SME sustainability business practices

4. Identify and document the most important non-governmental actors involved in policy-making processes

5. Identify existing initiatives, programs and projects by policy makers that have the potential to include provisions on the importance of sustainability reporting especially for SMEs.

Methodology

■ Desk study, secondary published data■ Searching information from November 2017 to April 2019

Results: 1 and 2 Existing policies and related actors1. Regulation of the Financial Services Authority Number

51/POJK.03/2017 About Sustainable Finance Implementation For Financial Services Institutions, Issuers, and Public Companies

Policy actors: Financial Services Authority (OJK)

2. Law of the Republic of Indonesia Number 40 Year 2007 About limited liability company

Policy actors: Government of Indonesia (Ministry of Justice & Human Rights)

3. Government Regulation Number 47 year 2012 About Social and Environmental Responsibility of Limited Liability Company

Policy actors: Government of Indonesia (The Ministry of Home Affairs)

4. Regulation of the Financial Services Authority Number 29/POJK.04/2016About Annual Reports of Issuers or Public Companies

Policy actors: Financial Services Authority (OJK)

5. Law of the Republic of Indonesia Number 32 Year 2009 About Environmental Protection and Management

Policy actors: Government of Indonesia (Ministry of Environment & Forestry )

6. Government Regulation Number 23/2010 About Implementation of Mineral and Coal Mining Business ActivitiesPolicy actors: Government of Indonesia (The Ministry of Energy & Mineral Resources)

7. Law of the Republic of Indonesia Number 13 Year 2011 About Handling of PoorPolicy actors: Government of Indonesia (The Ministry of Social Services)

3. Existing policies for SMEs1. Regulation of the Minister of State-Owned Enterprises Number

PER-09/NIBU/07/2015 About Partnership Program and Community Development Program State-Owned EnterprisesPolicy actors: Minister of State-Owned Enterprises

2. Law of the Republic of Indonesia Number 25 Year 2007 About InvestmentPolicy actors: Government of Indonesia (Ministry of Finance)

4. Non-government actors

■ Community or related actors, i.e banking sectors■ Academic, research institute / study center■ Business association, industry associations, for

example Indonesian Chamber of Commerce and Industry

■ Professional association■ Non-governmental organization (local, national,

international)

5. Initiative, program, project for SMEssustainability reporting

■ We cannot find any clear initiative, program, project that directly support SMEs to develop a sustainability reporting

■ The only initiative comes from private sector

Summary1. There are only one regulation related to sustainability reporting from The

Financial Services Authority (OJK), both for annual report and stand alone SR. The regulations apply to listed companies, banks, financial institutions, but not for specifically for SMEs.

2. The policy actors in Indonesia are predominantly conducted by the Financial Services Authority (OJK).

3. Regulation of the Minister of State-Owned Enterprises Development Program State-Owned Number PER-09/NIBU/07/2015 About Partnership Program and Community Enterprises which support SMEs through stated owned companies.

4. Non government actors involved in policy making process are: community or related actors, academic, business association, professional association, and non-governmental organization

5. It has not been found for any initiatives, programs, projects that directly support SMEs to develop sustainability reporting

A PATHWAY OF SUSTAINABILITY REPORT:MOTIVATION, PROCESS, CHALLENGES

Study conducted bySupported by


Background – Why Indonesia

■ Developing to developed countries with 677 PLCs – 15 Jan 2020

■ Huge opportunity for market with high density of population■ Economic growth around 5%

Objective of the study

1. To seek the motivations in developing Sustainability Reports (SR)

2. To look at the process of developing a Sustainability Report

3. To identify the challenges and benefits in developing a sustainability

report

4. To create values (impacts) of publishing a Sustainability Report

■ Qualitative research ■ A Case study: in-depth insights and interview■ Four SR leading companies in different industry sectors :

Cement (private-Int), Coal-mining (private-Int), Pharmaceutical (private –National), Infrastructure (State-owned)

Methodology

Results

1. Motivations:a) Regulator, compliance --- all of companiesb) Driven by top managements – cement, coalc) Want to be the first - infrastructured) Industrial and global pressure – coal, pharmaceuticale) Increasing numbers of green investors - pharmaceutical

Results2. Process of developing a Sustainability Report:

a. Preparation Phase : all companies using independent consultant: academician/university

b. Defining Sustainability : Pharmaceutical , Cement and Coal ---identifying material topic, infrastructure: follows standard

c. All companies apply GRI Standardd. Monitoring Process: only coal and infrastructure use independent

assurance Reason: Pressure from investor and winning award

e. Publishing and Reporting Results: websites, AGMS, Regulator

Results3. Challenges

a. Top management supportb. Data collection across departmentc. Data reliabilityd. understanding sustainability concepte. lacking competence and dedicated teamBenefits:a. Bridging the gaps : financial --- environment, socialb. Increase competitive advantagec. Complianced. Communication to investors

Results

4. Impact / Valuesa. Increase awarenessb. ‘Just’ compliance - no impactsc. ‘little’ image and branding - (only infrastructure: great image)

d. No significant values on the business process

Summary1. Top management and regulation are the key2. While publishing SR is just compliance – no values3. When there is no ‘sustainability governance’ the value of SR is

very little

Way forward:1. Role of government and investors

2. Continuous education --- academicians

FINANCIAL SERVICE AUTHORITY REGULATION: POJK 51/POJK.03/2017


POJK No.51■ Sustainability reporting is mandatory for:– Banking: starting in 2018 – 2019 – Listed: starting in 2020– Other financial services institution: starting in 2021 and

after– Assurance to increase reliability and trust from public is

encouraged

* Rationale: Support SDGs

24

Main Content of POJK No.51

1. Sustainability strategy2. Summary of sustainability performance: economic,

environment and social3. Profile of Company 4. Director’s message5. Sustainability governance 6. Sustainability performance7. Assurance, if any8. Feedback from various stakeholders

The Ministry of Environment andForestry– Environmental Evaluation Rating

■ Disclosures in environmental document has to be linked with SDGs –since 2018

■ Lacking of SDGs mapping --- just select whenever appropriate

■ Support SDGs but lacking of understanding the impacts

Current status1. All companies participating environmental rating evaluation

have disclosed SDGs2. Banking which has assets >350,000 USD has mandatory to

publish SR 2019 before April 20203. Up to the end of February 2020, there are 3 biggest banks

have published SR with SDG disclosures in various way4. All banks have applied POJK and GRI5. Understanding of material topics are significantly need to be

improved (boundary – limitation)

MALAYSIA’S SUSTAINABILITY JOURNEY


GLOBAL POLICY NATIONAL POLICY

The Eleventh Malaysia Plan: Anchoring Growth on People (2016-2020)

Agenda 2030 for Sustainable Development (SDGs)

Malaysia’s Sustainability Journey

5 Working Committees at the Ministry Level and their Respective SDGs

30

Source: Economic Planning Unit

Sustainability Reporting Drivers in Malaysia

The primary driver for sustainability reporting in Malaysia is Bursa Malaysia SecuritiesBerhad (Bursa Malaysia):

• Amendments to the Main Market Listing Requirements on Sustainability Reporting(October 2015) require public-listed companies (PLCs) to disclose their sustainabilityinitiatives as of 1st January 2016

31

Listing Company market capitalization as at 31 December 2015

Sustainability reporting requirement

Annual reports issued for FYE on or after

Main Market(unification of the Main Board and Second Board in 2009)

≥ RM2 billion ► Sustainability statement► Detailed disclosures

► 31 December 2016► 31 December 2016

RM1 – 2 billion ► Sustainability statement► Detailed disclosures


The rest of the listed companies

► Sustainability statement► Detailed disclosures


ACE Market(formerly known as MESDAQ)(start-ups and new companies looking for capital)

All listed companies ► Sustainability statement ► 31 December 2018

Staggered Compliance Timeline for PLCs

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Bursa Securities’ Main Market Listing Requirement: Bursa Malaysia’s Sustainability Reporting Guide 2nd Edition

This second edition of the Guide replaces the first 2015 edition, including more current case studies, reference to the SDGs and the TCFD recommendations, some guidance on integrated reporting and a new chapter on assurance to provide guidance on how it may be conducted.

33

Sustainability Reporting Guidelines and Framework in Malaysia

• Market Listed Companies under Bursa Malaysia are embarking into Integrated Reporting (IR) on Sustainability –adopting six capitals; Financial Capital, Manufactured Capital, Intellectual Capital, Social and Relationship Capital, Human Capital and Natural Capital in their reporting.

• All companies are expected to embark IR by year 2021

34

Future Trends in Sustainability Reporting in Malaysia

TAIWAN’S STOCK EXCHANGE


Conclusion – point to ponder

1. Sustainability report quantity increasing vs quality ?

2. What are the impacts ? --- is it really matter?3. Are we late? – how can we catch up?

Thank You

[email protected]@tsc-usakti.org

mailto:[email protected]

SUSTAINABLE FINANCE REGULATION TO SUPPORT SDG S€¦ · 1. Doctor of Philosophy (Ph.D)- Edith Cowan University, Perth, Australia 2. Certified Green Productivity Specialist – APO,

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