Live Talkshow With Armandi Oesman: Unveiling The Power of ESG
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00:00 You're still watching C2J Business. The Indonesian Stock Exchange has a number of listed companies
00:08 that can be categorized as environmentally friendly stocks and are summarized in the
00:12 IDX ESG Leaders Index with a total market cap that is 39% of the IDX total. In a period
00:20 between December 2023 and March 2024, there are 30 listed companies included in the IDX
00:26 ESG Leaders with a total market cap exceeding Rp 4,544 trillion as of February 2, 2024.
00:36 Based on market cap growth from 2018 up until February 2024, there were six green stocks
00:43 in the IDX ESG Leaders Index that managed to soar by hundreds of percents. Among them
00:49 are PT Chandra Asri Petrochemical and PT Barito Pacific.
00:58 Meanwhile based on data from ESG rating agency System Analytics, PT Telkom Indonesia is the
01:04 company with the highest ESG Index rating in the telecommunications sectors in the Indonesian
01:10 capital market. From the updated data in February 2024, Telkom achieved an ESG score of 27.1
01:19 with an environmental score of 6.83, a social score of 12.6, and a governance score of 7.66
01:32 points.
01:38 And to delve more into the topic joining me today is Mentor Inka founder Armandi Usman.
01:42 Hello, Mas. Armandi, thank you so much for coming to our studio.
01:47 Pleasure to be here. Thank you, Aline.
01:48 So, Mas, can you share your insights regarding the ESG and how important it is for companies
01:55 to pay special attention to allocate resources to focus more on the ESG?
02:02 Sure, sure. I think lately we've seen that ESG is becoming more of a scrutiny by not
02:10 only investors but also banks or other private credit lenders to various companies. And this
02:16 is primarily because I think there is an increased pressure from the society for investors and
02:22 also lenders of funds to add one more lens into the evaluation that they do to companies
02:30 which is an ESG lens because they expect these companies, as many other businesses, to operate
02:38 in a more environmentally sustainable way and also act in more socially responsible
02:45 manners.
02:46 So, in your opinion, we have delivered information about the listed companies that are considered
02:55 ESG, what is it, with ESG proficient. So, in the future, where do you think the trend
03:04 will go? Whether it will be only a gimmick for the capital market in Indonesia or do
03:10 you see that there's an increasing urge for the companies because of the benefits or maybe
03:17 the incentives that they will receive if they put more importance on ESG?
03:21 Sure. Yeah, I think it's inevitable that this market of ESG-themed investments or even debt
03:30 are growing in Indonesia and also in the region. As we can see, in 2023, I think OJK or the
03:39 Financial Services Authority released a figure of something close to 900 million US dollars
03:44 or equivalent to roughly almost 14 trillion Indonesian rupiah being issued in the form
03:52 of sustainability-focused debt instruments. And we've seen some of the state-owned enterprises
03:58 also capitalizing on the momentum of ESG investing or ESG-themed transactions. So, I think we're
04:09 still in the early stages here in Indonesia, but if we look at the region and also globally,
04:15 I think it's a market that eventually the Indonesian companies will have to adapt into.
04:21 So, how attractive actually are Indonesian companies in the eyes of big investors, global
04:29 investors to invest in the ESG companies in Indonesia?
04:34 Yeah, I think Indonesia is in a bit of a tricky position because if we look at the country
04:44 in the region, we are the biggest economy, we are the country with the largest population,
04:49 but at the same time, we are quite heavily reliant on the sectors such as agricultural
04:55 products or commodities, which are prone to all sorts of ESG scrutiny. So, I think those
05:01 companies that are able to communicate to the stakeholders and also demonstrate that
05:08 they are in fact adopting ESG to a higher standard, these are the ones who would be
05:14 able to succeed in fundraising activities, be it equity or debt. And this has been evidenced
05:22 last year where we saw a number of state-owned enterprises, say for example like Pertamina
05:27 Geothermal, they successfully issued a green bond which was oversubscribed by eight times.
05:34 So, I think the market appetite is there for the right companies.
05:39 Okay, you mentioned that we are still in the early stages. In your opinion, what needs
05:43 to be done by all the stakeholders to make this sustainable?
05:47 Sure, I think it's a combination of things, right? We do require a higher level of awareness
05:57 and also education, and at the same time, incentives are required to obviously incentivise
06:04 these businesses to be more ESG compliant. Say, if we look at the region, I would group
06:11 two countries where one group is for countries like Singapore or Thailand or Malaysia where
06:20 they are more integrated towards the global economy. These countries have little choice
06:25 but to adopt a higher ESG standard, say for example like Singapore, in order to remain
06:31 as a financial services hub in the region, they are putting aside something like 25 million
06:38 US dollars by the Monetary Authority of Singapore to develop sustainable finance specialists.
06:45 Same story with Malaysia, they have more clarity in the carbon market trading. And also Thailand,
06:52 half of their GDP is from exports to various countries, so their private sector are more
07:00 embracing towards ESG initiatives. And then you have the second group of countries which
07:05 are less integrated into the global economy like Indonesia where a large chunk of our
07:10 GDP is mainly coming from domestic consumption. So we see that tangible steps are being taken
07:17 by the government and also the industry players, but we need to accelerate the pace in order
07:24 to keep up with the other nations.
07:28 Accelerating the pace, what are the challenges in Indonesia, especially faced by the companies
07:36 to adopt the high standards of ESG in your opinion?
07:41 I think we need some sort of stimulants for ESG-related activities to really pick up pace.
07:52 Say for example it could be stimulus for companies that are engaged in certain ESG activities
08:00 or even reach a certain level of ESG parameters or metrics. We've seen some examples in this
08:08 space like how the government are encouraging banks and top-tier state-owned enterprises
08:15 to publish what they call the annual sustainability report. And if this could be made mandatory
08:23 for some of the other companies that are in the private sector, this could perhaps act
08:28 as a stimulus for companies to react in a similar way. And we've seen how some positive
08:36 impacts of these stimulus take place, like I mentioned Pertamina's green bond issued
08:43 last year, we saw Semen Indonesia as well issued a sustainability-linked loan last
08:49 year, and the banks, Bank Mandiri, BRI, they are very active in issuing debt instruments
08:56 that are sustainability-linked.
08:58 So how can the state-owned enterprises in Indonesia become the driver for the ESG implementation
09:08 in Indonesia?
09:11 I think number one, I see that many of the state-owned enterprises are already incorporating
09:20 the United Nations Sustainable Development Goals or the UN SDGs into their goals and
09:25 strategies and that's a great start. And I think secondly what they can perhaps do
09:31 is perhaps educate the ecosystem of their value chains or their supply chains to ensure
09:38 that their suppliers or their buyers are similarly adopting the same level of ESG standards.
09:47 This could help stimulate the overall value chain to become more environmentally friendly,
09:54 more socially responsible, so perhaps the large state-owned enterprises especially,
10:00 they can continue doing what they're already doing and also spread that in their ecosystem
10:06 value chain.
10:08 So we see strong appetite from the global investors and also like mindfulness to invest
10:16 in companies that are ESG-oriented, right? But as for the investors in Indonesia, the
10:27 retail investors, where do you see that, do you think that they will have this kind of
10:33 appetite like our domestic investors? Because from my personal experience, I invest in funds
10:42 based on ESG companies index like that and I think the performance is quite good, outperforming
10:49 the benchmark. So I want to know from your perspective the appetite for the domestic
10:58 investors for products like this.
11:02 Sure, sure. Thanks, Alin. I think if we talk about investing, we want to look at how much
11:08 of economic value can be created from such activities, right? And I think adding an ESG
11:16 lens to investing does not necessarily mean that you may get the best returns, but it
11:23 enables you to think about whether investing in these companies or in these instruments
11:29 are in line with your personal values, for example, right? And for the companies that
11:34 are adopting higher ESG standards, it's not solely just about the brand reputation or
11:41 the customer loyalty or the investor preference, but it's also about opening up themselves
11:46 to new markets, right? Like companies I mentioned earlier that are exporting into countries
11:53 in the European Union or in North America, without a high level of ESG standards, they
11:59 would not be able to access these markets or these countries. Now, with that level of
12:06 ESG awareness and also implementation, not only will they be able to, according to your
12:13 view, win the hearts of the investors, but also access new markets which will eventually
12:21 or ultimately lead to higher revenue.
12:24 Well, thank you so much for sharing your insights. Armandi Usman, co-founder of Mentor, Inc.
12:29 Thank you once again for coming to our studio.
12:30 Thank you, Alin. Pleasure to be here.
12:31 Yes. So, we're going for a break when we return our daily recap from the stock market.
12:36 You don't want to miss, of course. Okay, we'll be right back.
12:39 Thank you.
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12:52 Thank you.
12:57 (upbeat music)