Challenges for Sustainability Index: Is Being ‘Green’ Economically Viable for Indonesian Mining Companies?

Abstract:     
Starting June 2009, Indonesia Stock Exchange in cooperation with environmental NGO, Yayasan KEHATI, formed a sustainability index named SRI-KEHATI. The Index is based on Sustainable and Responsible Investment’s standard of assessment. SRI-KEHATI enlisted only companies that being considered gave excellent performance both in stock market and sustainable development. Sustainable index itself has been recognized as a reliable benchmark for the Sustainable and Responsible Investment worldwide. However, SRI-KEHATI has brought up controversy as it enlisted three mining companies on its index; PT Aneka Tambang Tbk, PT Timah Tbk, and PT Bukit Asam Tbk. This research is questioned whether any economically viable for the mining companies could be gained in stock market by being enlisted on sustainability index. This paper shall introduce the implementation sustainability index and up bring the examination of the benefits of being listed on the sustainability index vis a vis the market capitalization of the mining companies. The objective of the paper is to find any influence of the sustainability index to the mining companies’ position in stock market along with the increasing of the companies’ corporate social and environmental responsibility. Some economy tools will be used to examine the profitability of the three mining companies before and after being enlisted on SRI-KEHATI index. Interview with each company’s corporate secretary also being conducted in Indonesian language to extract the company’s own perspective on the issue itself.

Number of Pages in PDF File: 20

Keywords: Sustainable and Responsible Investment, Sustainable Index, Mining Companies, Indonesia, SRI-KEHATI, profitability

JEL Classification: O16, L70

working papers series