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Responsible investment on rise as IDX launches ESG-based indexes
The Indonesia Stock Exchange (IDX), in collaboration with the Indonesian Biodiversity Conservation Trust Fund (Kehati) Foundation, has launched two indexes based on environmental, social and governance (ESG) scores to cater to increasing demand for responsible investment products.
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Indonesia Stock Exchange (IDX) president director Inarno Djajadi (third left) and Kehati Foundation executive director Riki Frindos (third right) launch the ESG Sector Leaders IDX KEHATI and ESG Quality 45 IDX KEHATI indexes at the IDX building in Jakarta on Monday. (Indonesian Stock Exchange (IDX) YouTube channel/-)
T
he Indonesia Stock Exchange (IDX) has two new indexes that are based on environmental, social and governance (ESG) scores, catering to growing investor interest in the performance of companies beyond their corporate financials.
The two indexes were launched on Monday in collaboration with the Indonesian Biodiversity Conservation Trust Fund (Kehati) Foundation.
While the ESG Sector Leaders IDX KEHATI consists of companies with the highest ESG scores in their respective sectors, the ESG Quality 45 IDX KEHATI reflects 45 companies with top scores in both ESG and financial performance.
To determine their ESG scores, Kehati Foundation assesses companies based on their sustainability reports and financial reports of the past five years. The foundation excludes companies in nine sectors, which include tobacco, pesticides and genetically modified organisms (GMO).
The ESG scores reflect companies' responsibility regarding energy use, greenhouse gas emissions and consumer rights, among other assessment criteria.
“These indexes can become the underlying reference for other investment products, such as mutual funds or exchange-traded funds [ETFs],” IDX president director Inarno Djajadi said during the launch ceremony on Monday.
Assets under management (AUM) of ESG-based mutual funds and ETF products more than quadrupled to Rp 3.38 trillion (US$236.6 million) in October from Rp 730 billion in 2017, according to Financial Services Authority (OJK) data.
