Afternoon Talk #3 FEB UI Anniversary: PPA FEB UI, Sustainability Reporting: Compliance Activity or Strategic Activity?
Rifdah Khalisha – Public Relations FEB UI
DEPOK – (13/10/2021) On Wednesday (13/10), in the 71st Anniversary Series of events, FEB UI held a Series 3 Evening Talk with the Accounting Development Center (PPA) FEB UI with the theme “Sustainability Reporting: Compliance Activity or Strategic Activity?”.
As presenters were I Made Bagus Tirthayatra (Director – Directorate of Financial Assessment of Real Sector Companies, Financial Services Authority), Elvia R. Shauki (Member of the Financial Accounting Standards Board – Indonesian Financial Association and Lecturer at FEB UI), Kris Hananto (Executive Vice President, Compliance) Division – PT Bank Rakyat Indonesia), and Chaerul D. Djakman (Lecturer at FEB UI). Also present was event guide Vera Diyanty (FEB UI Lecturer and Head of PPA FEB UI).
Bagus explained about the sustainable finance milestones in Indonesia, “Seeing that the increase in global temperature is accelerating, OJK issued the Roadmap for Sustainable Finance Phase 1 in 2014 and Roadmap for Sustainable Finance Phase 2 in 2020. On the regulatory side, we issued POJK 51/POJK.03/2017 and POJK 60/POJK.04/2017 regarding sustainable finance. To that effect, we provide incentives to reduce the levy fee by 25 percent of the registration fee and green bond registration statement.”
Furthermore, OJK released the Financial Services Authority Circular Letter Number 16/SEOJK.04/2021, a guideline for compiling annual reports containing the implementation of sustainable finance for issuers and public companies.
“The sustainability report is an integral part of the annual report. If it can be presented separately, the sustainability report must contain all the information as regulated and compiled according to the technical guidelines for the preparation of the sustainability report. The submission must also coincide with the annual report.” he explained.
Elvia said, “A sustainability report is a report on non-financial performance information—a variety of things outside of the financial aspect—covering environmental, social, and corporate governance (ESG) issues. This report is the first step in implementing a strategy that helps companies to set goals, measure performance, manage impact and risk, and drive value for their stakeholders.”
It is important for companies to prepare sustainability reports. Adams and Abhayawansa’s (2020) research reveals that the flow of funds to sustainable investments reached new heights in the midst of the pandemic. Companies with high ESG ratings are proven to earn higher stock returns and experience lower volatility. On the other hand, the flow of investment funds to companies with low ESG ratings indicates a poor performance.
According to the IFRS Foundation (2021), in the current situation, investors around the world are looking for insight into factors related to sustainability in valuing companies, both for now and in the future. They make various strategic decisions, namely focusing on companies that prioritize climate issues, building on existing frameworks, and using a building blocks approach.
For Kris, sustainability has become a common agenda, including companies, businesses, academics, communities, and individuals. The sustainability strategy at BRI is the bank’s efforts to balance and ensure sustainable business growth in the social and environmental spheres. In addition, it also contributes to the achievement of the Sustainable Development Target (TPB).
Banks as financial service institutions also prepare sustainability reports because they must follow POJK 51/POJK.03/2017 to implement sustainable finance, identify ESG risks, and make preventive steps in in the course of their business activities. From the investor side, they want banks to be directly involved in various sustainable finance practices to support TPB. Meanwhile, from the customer side, they want products and services to be efficient and environmentally friendly as technology advances.
BRI has embarked on a sustainable finance journey since the publication of the Sustainability Report in 2013, prior to the enactment of POJK 51/2017 concerning the Implementation of Sustainable Finance. November 2018, BRI prepared a Sustainable Finance Action Plan (RAKB) containing BRI’s plans in the short and long term for the next 5 years. In March 2019, BRI issued the first sustainability bond in Indonesia. This funding aims to finance projects that have an impact on social and environmental aspects.
BRI’s sustainability report refers to POJK 51/2017, Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), The Sustainable Banking Assessment (SUSBA), and Task Force on Climate-related Financial Disclosures (TCFD), and is guaranteed by institutions independent. BRI prepares a sustainability report in order to carry out its commitment to the sustainability aspect and provides accurate, communicative and comprehensive information for BRI stakeholders.
Chaerul said that, “Companies must find the best way to improve long-term performance, minimize risk, and strengthen financial reporting by complying with all relevant regulations, laws and standards. Therefore, sustainability reports are a solution to improve and expand corporate reporting in facing business challenges.”
Sustainable business is important to pressure companies to use natural resources effectively, maintain company welfare, and pay attention to social quality, society and the earth.
In its implementation, each organization can request an existing unit or form a special unit to coordinate implementing sustainability practices or programs spread across various other work units. (hjtp)
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