ENHANCING SUSTAINABLE BANKING PRACTICES: IMPLEMENTING THE BESGI FRAMEWORK TO INDONESIAN BANK
Climate change, a global phenomenon, has been largely driven by human activities since the Industrial Revolution in 1750. According to a July 2023 United Nations report, the global warming age is officially over, and the global boiling era is beginning. The United Nations emphasized global action on...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/80680 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Climate change, a global phenomenon, has been largely driven by human activities since the Industrial Revolution in 1750. According to a July 2023 United Nations report, the global warming age is officially over, and the global boiling era is beginning. The United Nations emphasized global action on emissions, climate adaptation, and climate change, urging G20 members to reach net zero emissions by mid-century including action from financial institutions. As part of G20 members, Indonesia with their state financial service authority called Otoritas Jasa Keuangan (OJK) is implementing a sustainable finance program to enhance financial services institutions' financing, durability, and competitiveness to achieve net zero emissions goal referred by the United Nations.
Sustainable finance integrates environmental, social, and governance principles into business decisions. Since 2011, ESG scores have been used to analyze banks' financial performance. The BESGI score, developed by Ielasi et al., (2023) provides a comprehensive assessment of banks' ESG performance considering both direct and indirect impacts using the Multidimensional Synthesis of Indicators (MSI) aggregation method.
The author offers an empirical contribution. The BESGI scoring model was applied to 14 of Indonesia’s banks based on KBMI 3 and 4 in the period from 2020-2022 and analyzed the impact on financial performance and financial stability. The BESGI score results in fluctuating data with the highest obtained by Mandiri amounting to 0,711 in the year 2021 while the lowest obtained by BTN amounting to 0,141 in the year 2020. This framework shows that the Indonesian banking sector focuses on financing and investment toward sustainable finance including governance aspects. The BESGI Score has insignificant results on banks’ performance and stability. Further research is needed with broader observation and different models.
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