Abstract
Sustainable finance is one of the instruments that can be used to achieve sustainable development goals. Practices of sustainable finance are regulated in the Financial Services Authority Regulation No. 51 / POJK.03 / 2017 (“POJK 51”), where one of the requirements in its implementation is to publish a Sustainability Report annually. However, before being obliged to release a Sustainability Report, banks, particularly BUKU 4, had published the report. Seeing that the Sustainability Report has been prepared before reporting requirements, these banks are running a sustainable business. To measure the level of sustainability of a bank, we build a Sustainable Financial Index. The Sustainable Financial Index is compiled based on 42 indicators built on sustainable finance’s eight principles. Using Bank Mandiri, BCA, BNI, BRI, and Bank CIMB as the observed bank, the results show that the Sustainable Financial Index for each bank has increased from year to year. The increment indicates that the practice of sustainable finance is running well in BUKU 4. Besides, each bank has different characteristics; thus, the principles that stand out in implementing sustainable finance differ from one bank to another. However, the index has several limitations, so that further index development is required.Keywords: BUKU 4, Sustainable Financial Index, POJK 51, Sustainability Report
Highlights
With the United Nations’ resolution on the Sustainable Development Goals (UN Resolution 70/1), all United Nations (UN) members have the same commitment to accomplish these development goals by 2030
Based on the obtained results, it can be seen that overall, Sustainable Financial Index in each bank has increased significantly from year to year
The increase in Sustainable Financial Index could be caused by several things, including the increased awareness of banks to implement sustainable finance in their business processes and advanced knowledge of sustainable finance
Summary
With the United Nations’ resolution on the Sustainable Development Goals (UN Resolution 70/1), all United Nations (UN) members have the same commitment to accomplish these development goals by 2030. As an authorized institution to regulate the financial services industry, The Financial Services Authority issues regulations that support the implementation of the SDGs agenda, in the financial sector They issued Roadmap for Sustainable Finance in Indonesia (Otoritas Jasa Keuangan, 2014), followed by the Financial Services Authority Regulation No 51 / POJK.03 / 2017 (“POJK 51”). In this regulation, sustainable finance is defined as comprehensive support from the financial services sector to create sustainable economic growth by aligning economic, social, and environmental interests. A Sustainability Report is a report that contains economic, financial, social, and environmental performance carried out by financial service institutions in running a sustainable business. This index is expected to fill the gap in Indonesia's currently no index on sustainable finance
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