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Lack of ESG compliance to cost Indonesia investment prospects: Analysts
The country is expected to miss out on potential investment in the downstream mining sector if no significant effort is made to enforce environmental, social and governance (ESG) principles.
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Adding value: A nickel smelter operates at PT Virtue Dragon Nickel Industry (VDNI) in Konawe, Southeast Sulawesi, on Sept. 21, 2022. (AFP/Andry Denisah)
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ndonesia is expected to miss out on potential investment in the downstream mining sector if no significant effort is made to enforce the implementation of environmental, social and governance (ESG) principles, an expert has warned.
A global push to meet the country’s energy transition and net zero targets has zeroed in on pushing electric vehicle (EV) adoption, but experts have questioned whether there is enough of a focus on ESG in the development of Indonesia’s downstream nickel industries.
As they seek opportunities in a global EV market estimated to reach a size of US$1.318 trillion by 2028, according to market intelligence provider Fortune Business Insights, mining companies face the challenge of balancing a significant ramp-up in the production of critical minerals with the need for sustainable mining practices in line with ESG principles.
Hendri Yulius Wijaya, an senior ESG risk assurance manager at consultancy PwC Indonesia, said an ESG focus was now a business imperative rather than only a matter of compliance with regulations, but various research reports and expert analyses had highlighted inconsistency in ESG implementation across Indonesia’s mining industry, which was why a government policy to enhance sustainability reporting was critical.
“Considering the recent findings, we can assume that concerns around ESG implementation in Indonesia’s mining industry affect [business decisions to invest in and work in the country]. Any noncompliance can easily threaten investment and operation plans,” he told The Jakarta Post on Monday.
The challenge in developing the EV industry as a form of nickel downstream industrialization was the need for nickel smelters, including facilities that use a lot of energy to process low-grade nickel ore, an industry fraught with ESG risks, researchers said.
Read also: Sustainable companies 'attract' investors, talents to Indonesia
