Promoting Sustainable Financial System in Indonesia Towards SRI-KEHATI Index

Abstract

This study is an attempt to examine whether the present of sustainable equity index SRI KEHARI promotes sustainable financial system in Indonesia. Sustainable Financial System as a part of sustainable development gives a serious impact to enable broad and equitable economic growth. In order to support the system, Indonesia’s financial market has SRI KEHATI index as a benchmark for Sustainability Responsible Investment (SRI) portfolio in the Indonesia Stock Exchange (IDX). To this end, this study uses Capital Asset Pricing Model (CAPM) and event studies approach. The data of the Jakarta Composite Index (JKSE), BI rate and stock prices of the listing companies in SRI-KEHATI index from the year of 2006 until 2010 are utilized to provide empirical evidences for this study. Based on our findings, the announcement of SRI-KEHATI Index had no significant effect on the return of each listing companies. It implies that investors might not really concern on the announcement of the index itself. Therefore, the government and NGO should do some further actions to increase the awareness of Indonesian society and finally achieve sustainable financial system.