Environmental, Social, and Governance (ESG) has become a significant focus for entrepreneurs, as it is one of the essential factors in the ecological, social, and corporate governance spheres. Investors use ESG as a standard and strategy to evaluate a company’s behavior and financial performance. Today, ESG is a pillar in a framework that aims to identify non-financial risks and opportunities in a company’s routine. Therefore, the ESG transition is inevitable.
In implementing the ESG transition, three significant challenges must be faced. President Joko Widodo conveyed this in his speech at the S20 High-Level Policy Webinar on Just Energy Transition on March 17, 2023. He mentioned, “The energy transition will change many things, including jobs, development scenarios, and business orientation. Three main challenges in the energy transition need attention from all parties.”
The first challenge is access to affordable clean energy. Not all world citizens can access reliable, sustainable, and modern energy. The second challenge is securing substantial funding to support the energy transition. The third challenge is support for research and technology. In the energy transition, research and technology are essential to produce new technologies that are more efficient and competitive to increase the added value of renewable energy industry products and reduce production costs.
Government Support
The ESG Implementation Policy is tangible evidence of follow-up to the sustainable infrastructure agenda and quality infrastructure investment of the G20 Indonesian Presidency. In infrastructure financing, the Ministry of Finance has an important role, and this time, they collaborated with PT Indonesia Infrastructure Finance (IIF) to launch the ESG Framework and Manual.
This success is also inseparable from the support of the United Nations Development Programme (UNDP) and the Government of Canada, which provided grants through a World Bank program to develop an ESG Framework and Manual for managing government support in infrastructure financing.
In its explanation, the Ministry of Finance said that applying ESG in managing infrastructure projects has significant benefits. One of them is helping stakeholders comply with applicable environmental regulations and standards so that the project can have a more powerful positive impact on development. In addition, this policy also opens access to broader financing and increases public acceptance of the development project.
ESG Implementation to Pursue
The National Coordinator of the civil society coalition institution Publish What You Pay (PWYP) Indonesia, Aryanto Nugroho, emphasized the importance of Environmental, Social, and Governance (ESG) implementation in the extractive industry. According to him, Indonesia needs to continue to catch up with the application of ESG, both in granting licenses and investment requirements. Furthermore, Aryanto stated that the energy transition can only be achieved if coal energy is completely stopped. The government is also expected to adopt ESG standards to support its implementation.
Aryanto also highlighted the expansion of smelter construction that still uses coal fuel. According to him, this will result in clean energy only becoming an illusion. He also emphasized the importance of ESG implementation with no setbacks in various government sectors. Aryanto explained that implementing ESG provides short-term benefits and profits and has a long-term impact. ESG implementation is expected to become a sustainable environmental standard and be part of a just energy transition.
Source: DEMFARM.id