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Esg Capability Statement
Esg Capability Statement
Creation Journey
This document has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You
should not act upon the information contained in this publication without obtaining specific professional advice. No representation or
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Table of contents
Introduction 4
Our Services 25
Our Specialists 29
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Introduction
This document has been prepared for general guidance covering PwC Indonesia’s ESG capability and services. Our
deep expertise and experience has been developed through years of providing sustainability related services to our
clients in Indonesia and across Southeast Asia.
As a result of a rapidly increasing global focus on broad ESG sustainability issues from government, investors, the
private sector and the public over the past few years, a trend exacerbated by the COVID-19 pandemic, we have
witnessed a drastic shift towards better understanding climate change, sustainability and related ESG issues, as
companies and organisations look to identify and respond to their ESG risks and opportunities. ESG management &
performance can increase or decrease the top & bottom line as well as a company’s reputation & social licence to
operate. To respond to this growing market demand, we have prepared this statement of capability to help you better
understand the ESG value creation journey and how PwC as a trusted advisor can assist and guide you with your
needs and requests.
This document focuses on ESG integration into your company or organisation with some elaboration on ESG
reporting and rating standards. In section three of this document, we present a summary of additional ESG related
services which we can offer you.
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ESG Value
Creation Journey
Illustrative
Governance
Environmental pillar Social pillar
pillar
Climate Natural Pollution & Environment Human Product Stakeholder Social Corporate Corporate
change resources waste opportunity Capital liability perspectives opportunity governance behavior
Toxic
Carbon Opportunities Labour Product safety Controversial Access to
Water stress emissions & Board diversity Business ethics
emissions in clean tech Management & quality sourcing communication
waste
Packaging Opportunities
Product carbon Biodiversity & Chemical Access to Anti-competitive
material & in green Health & safety Executive pay
footprint land use safety finance practices
waste building
customer increased ESG review & proactive climate strategic new product/ brand value
value switching regulatory remediation impact resilience realignment to service and multiple
Business as usual: Value erosion from Less ambitious: Value preservation can be More ambitious: Unlocking significant value
ESG headwinds is the ‘do nothing’ scenario achieved through targeted ESG performance creation is possible through ESG-led investment
improvement strategies and sustainable transformation of the business
To get started, business needs to: model and existing assets
Without positive action, progress on ESG issues by
peers, changing consumer, employee and investor • Identify value-linked ESG factors and perform For business to transform its operations and revenue
expectations, and new regulations, will inevitably rapid remediation of critical issues; streams, it needs to:
lead to value erosion. • Review operations and value chain for exposure • Align value proposition with ESG through a review of
Inaction on ESG can lead to value destruction. to climate change, social unrest, and poor the company’s vision and mission;
corporate governance, and develop and • Re-evaluate business model and revenue streams
implement risk mitigation plans; and identify possible transformation strategies which
• Define targets, KPIs and a roadmap to drive incorporate ESG risks and opportunities;
ESG performance; and • Develop a comprehensive public relations and
• Communicate relative ESG performance and communications strategy which can directly
resilience to key stakeholders. communicate the company’s sustainability vision and
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mission with its consumer base and the broader public.
Illustrative
Current Resource Insurance Labour Tax Benefit Compliance New Customers New Revenue Better Access to Lower Improved
Value Efficiency Premium Productivity and Market Streams Reputation Capital & Interest Rate Value
Finance
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Illustrative
Factors Impact
Investment Spectrum
Impact Impact
Traditional Responsible Sustainable Venture Traditional
Investment Investment
Investment Investment Investment Philanthropy Philanthropy
(Return First) (Impact First)
Focus
ESG
incorporation to Investment
ESG Investment Venture
create long-term designed to have
Limited or no incorporation to designed to have investment Grants focused
value by measurable
ESG meet investor meaningful social focused on on addressing
mitigating risks social &
incorporation requirements & & environmental addressing societal issues
and identifying environmental
ESG regulations impacts societal issues
growth impacts
opportunities
ESG incorporation
Financial return Social return & Social return &
Financial return Financial return Social return
focused on long-term adequate financial sub-market Social return only
only prioritised prioritised
value creation market rate financial return
STAKEHOLDERS CAPITALS
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Illustrative
How can a company affect its share price through ESG action?
Reporting
strategy ESG Ratings
Identifying key Listed companies’ ESG
ESG strategy stakeholders’ performance will be
Setting a requirements, rated on the stock
sustainability strategy regulatory frameworks, exchange. Unlisted
that reflects company database needed for companies can obtain a
and board’s vision comprehensive rating on a voluntary
around ESG reporting, etc. basis.
GHG
1 2 3 4 5 6 Share price
Impact on
share price
Sustainability strategy that reflects company and board’s vision Incorporate an ESG/sustainability strategy into your
1. ESG Strategy corporate strategy
around ESG
Comprehensive strategy which provides an overview of your key Identify your key stakeholders’ requirements, regulatory
3. Reporting stakeholders’ expectations and reporting frameworks/standards that frameworks, database needed for comprehensive reporting
strategy best support your disclosure, reporting, and rating requirements
4. Sustainability A report that provides an overview of your ESG performance as it Develop a full materiality matrix which covers all your main
relates to your management, operations, and value chain ESG themes and topics
reporting
Ratings that assess your company’s ESG performance conducted In line with your reporting strategy, complete necessary
5. ESG Risk Ratings by independent third party verifiers actions in preparation of your ESG performance evaluation
Public distribution and socialisation of your overall ESG Signal to the market that your company has incorporated ESG
6. Dissemination performance including ESG and net-zero ambitions, sustainability across your operations with support from your marketing and
report, and ESG risk rating social media teams
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PwC’s Corporate Sustainability Framework can enable your company to
comprehensively incorporate ESG across your value chain
Our framework will be adapted to your needs and urgent priorities, but typically the journey starts by
developing an ESG strategy linked to your corporate strategy
● Develop a strategy to position your company in a sustainable tomorrow, considering business imperatives
and stakeholder interests, with the following key components:
Value Creation ○ Vision and mission for sustainability
Strategy ○ Sustainability strategy with material issues and its priority in materiality matrix
○ Measurable goals and targets
● Implement sustainability aspects into everyday operations and embed sustainability in supply chain,
cost transformation, IT transformation, etc., with:
Initiatives, Measures, ○ Roadmap with initiative charters and action plans
and Enablers ○ Set of KPIs, their definition and calculation methodology
○ Gap analysis between your current condition and where you would like to be
● Define and implement the right high quality non-financial KPIs to address stakeholder
Non-Financial Reporting & interest, which can be conducted through:
Assurance ○ Knowledge sharing session on sustainability disclosure
○ Sustainability data collection template
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Sustainability
Reporting, Ratings,
and Indices
Non-exhaustive
• A broad set of principles-driven • A document issued by a • Assessment of a company’s • An index which tracks,
guidance on what information standard-setting body, designed material ESG performance / risk measures and ranks the
should be covered, and how it to make a framework actionable management1 measured using performance of a group of
Definition should be prepared and by dictating the specific rules for quantifiable indicators and companies or assets in
disclosed. what should be reported. aggregated into a single score / sustainability using a variety of
rating. metrics and methodologies.
• Guidance for all organizations to • Disclosure of information • Absolute ESG performance (often • ESG Performance relative to
move the world towards more concerning the ESG issues within industry weighted to remove peers.
Scope sustainable future. and related to business industry bias). • ESG Performance relative to
management. overall standards.
• Used to showcase commitment to • Provides transparency – as a • Provides stock-specific / fund- • Provides information to
ESG and Sustainability. response from the government specific information on ESG investors on the relative
• Provides the baseline metrics to and society toward factors that performance / risk management1. performance of the companies
further demonstrate current jeopardize social structure. • Used to monitor specific equities in the index .
Use
environmental impact. • Provides internal monitoring to and funds. • Forms a high-level basis for
• Allows to define and formulate the external communication toward • Used to construct ESG indices. stock inclusion into the
metrics to track current ESG the stakeholders. investable universe.
progress.
Examples
Note: 1) there are different methodologies used by different rating agencies to assess ESG performance including level of ESG disclosure, action against ESG commitments, action taken to manage ESG risks, etc. ESG criteria are often
weighted according to industry and the overall assessment is based on which ESG factors have a clear correlation to financial performance of the company / industry
Source: Positive Investment Imperial, Company/institution websites, PwC Analysis
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Sustainability frameworks offer organizations guidance on how to
report on different aspects of their non-financial performance
Covers reporting practices and Acts as a framework that Business-level disclosure on Guides companies on the path to
Comprehensive scheme for
management approach in dealing Covers 11 recommendations assesses the long-term viability of climate change, forests, and setting emissions reduction
reporting GHG emissions by
Key Features with material Economic, for climate-related financial a firm’s business model and water designed to provides a targets that are verifiable and in
both public and private actors
Environmental, and Social (EES) disclosures promotes effective allocation of structure for collecting data for alignment with the goals of the
across the value chain
topics resources reporting Paris Agreement
● Complementary to TCFD,
SDGs
• Voluntary reporting
● CDP was consolidated into ● The SBTi is a partnership ● In 2016, 92% of Fortune
• Voluntary reporting • Complementary to the other
How They ● Mandatory to report as a
• Complements UN sustainability frameworks
the IFRS Foundation to between CDP, the United 500 companies responding
signatory support the work of the Nations Global Compact, to the CDP used GHG
Complement ● Mandatory to report against
Principles of Responsible • In June 2021, the IIRC
newly established World Resources Institute Protocol directly or indirectly
Investing (PRI) and TCFD merged with SASB to form the
Each Other the TCFD framework
recommendations Value Reporting Foundation
International Sustainability (WRI) and the World Wide through a program based
Standards Board (ISSB), Fund for Nature (WWF) on GHG Protocol
(VRF)
which is expected to be
completed by June 2022
• Provides a comprehensive
picture for long-term value ● Complements to TCFD
creation ● Climate Disclosure Standards
● The ISSB which is expected
• IFRS Foundation will Board (CDSB) was • Helps to meet the SDGs
to be completed by June • Complements UN PRI • Voluntary reporting (driven
How They 2022 is present as a form of • Supplements TCFD with its S
consolidate VRF and the
towards mandatory for
consolidated into the IFRS with economic,
Climate Disclosures Foundation to support the work environmental and societal
Complement consolidation of global bodies and G components
Standards Board (CDSB) into
American companies)
of the newly established dimensions that are all
(CDSB, IIRC and SASB), as • Aligned to the UN SDGs • Complements to GRI
Each Other well as the support of
the International
standards
International Sustainability directly addressed by ISO
Sustainability Standards Standards Board (ISSB), which standards
IOSCO, TCFD and WEF.
Board (ISSB), which is is expected to be completed by
expected to be completed by June 2022
June 2022
• AAA – CCC scale • 0 – 100 risk score • AAA – D scale Percentage scores rendered Total scores between 0 -
Rating Scale • Industry-adjusted • By industry / global • Sector weighted to grades A+ to D- 100
A - D scale
• 220 indicators & 450 • 28 ESG issues across 59 • Over 80 key issues
• 37 ESG issues across 10 • 450+ ESG metrics
fields, 138 sub-industries hot topics • Weighted by industry • Climate change
Key ESG themes, sector specific • 186 comparable
• Data on how well the • Risks / sentiment data on • Performance type data • Forests
Metrics • Disclosure and performance
company is managing how exposed is the
measures
on steps taken by the • Water security
type data • Performance type data
risks company company
Company reputation
• Individual company and fund Company ESG risk score for Company ESG risk score for Integration of ESG factors Integrated into financial
analysis, align with TCFD,
Usage ESG score and report security screening and portfolio monitoring, quant into portfolio analysis, equity analysis for asset
uncover ESG risk &
• MSCI ESG Indices portfolio construction analysis, back testing research, screening management products
opportunity
All indices managed by KEHATI are selected through a three-phase process conducted every six months, with
Established in 1994, the non-profit KEHATI
an index rebalancing conducted every three months:
aims to catalyse innovative solutions to
conserve, manage, and utilize Indonesia’s Filtering Financial and Liquidity Assets
biodiversity in a sustainable manner
3 KEHATI awards
Assessing Companies’ ESG Aspect
Annual sustainability awarding across different categories to
Environmental Social Governance
including but not limited to: individuals, NGOs2, researchers,
● SustainableProducts & Innovations ● Employee training and development ● Stakeholder rights’ protection
schools, communities, universities, businesses, as well as Phase 3 ● Natural Resources ● Manpower practices ● Competency and role of BoC and
government institutions. ● Energy Use ● Occupational health and safety BoD3
● Greenhouse gas emissions ● Product and client liability ● Informationquality and transparency
● Waste management ● Social environmental impact ● Business ethics
● Sustainable management practices
Note: 1) Grants sourced and collected from multilateral donors, the private sector, endowment funds, philanthropies, and crowdfunding; 2) Non-government organisations; 3) Board of Commissioners and Board of Directors
Source: KEHATI, Indonesian Stock Exchange, Company Websites, PwC Analysis
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Sustainalytics is one of the largest ESG Risk Ratings available, rating
13,000+ companies worldwide
Sustainalytics at a glance ESG Rating Framework
Acquired by MorningStar in 2020 and with a track record of 30+ years, Sustainalytics’ ESG Risk Rating combines exposure to industry material ESG risks and
Sustainalytics provides ESG research, ratings and data to institutional
management of those risks to obtain an overall ESG risk rating. Rating a company’s ESG risk out of
investors and companies.
100, they start by determining the company in question’s sub-industry and further assess:
Key figures
1. Total Exposure Analysis of exposure to material ESG
issues at the sub-industry level
Source: Sustainalytics
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Several regulations have been issued to advance private sector action in
support of the government’s sustainability efforts
2017 2017 2017 2021 2021 2022
SDGs1 Sustainability Green Bonds / Sustainable Finance Carbon Tax Green Taxonomy
PP 59/2017 Reporting Sukuk Roadmap OJK3 PP7 98/2021 OJK
POJK4 51/2017 POJK4 60/2017 Phase 2
Itemised the Specified the application Specified the green bond Sets out a detailed work Starting July 1, 2022, the Standardised definition
implementation of the of sustainable finance to framework in Indonesia, plan for realisation of a GoI will start collecting and criteria from
SDGs in Indonesia. financial services, including requirements Sustainable Finance carbon taxes through a economic sector
The regulation institutions, issuers, and and issuance processes. Ecosystem in Indonesia up cap and tax system at activities that are
specifies GoI2 publicly listed Since, the MoF5 has to 2025, bridging upon the 8 IDR 30 per kilogram of considered “green” (i.e.
coordination and companies. The issued green sukuk6, Principles of Sustainable carbon dioxide equivalent support climate change
action needed for the regulation mandates amounting to Finance set forth in Phase 1. emitted. Carbon- intensive mitigation and
achievement of the these stakeholders to USD 3.99 bn sectors such as palm oil adaptation). The green
SDGs. issue sustainability businesses and coal-fired taxonomy is a living
reports. power plants operators document that will be
will be the first sectors to periodically updated.
be affected.
Note: 1) SDGs: Sustainable Development Goals; 2) GoI: Government of Indonesia; 3) OJK: Indonesian Financial Services Authority; 4) OJK Regulation; 5) MoF: Ministry of Finance; 6) Sukuk: Shariah-compliant investment instruments;
7) PP: Presidential Regulation
Source: Indonesian Cabinet Secretariat, OJK, Indonesian Ministry of Finance, PwC Analysis
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Our Services
Non-exhaustive
Strategy &
Climate Operations Disclosure Finance
Transformation
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Non-exhaustive
1 ESG strategy, roadmap, governance 2 ESG climate risk framework, GHG 3 Indonesia’s SDGs Financing Hub
and reporting footprint & target setting
Client Client Client
Indonesian food and beverages company Leading Malaysian conglomerate United Nations Development Programme
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Illustrative
4 Buy-Side ESG Due Diligence 5 Indonesian Green Sukuk 6 Carbon Emissions Inventory
Sustainability Assurance
Client Client Client
Indonesian investment management enterprise Indonesian Ministry of Finance Indonesian start-up
Overview
PwC was engaged to assist with financial, tax Overview Overview
and ESG due diligence and ESG valuation PwC was engaged by the client to provide PwC was engaged by the client to develop a
services on 4 target entities. limited assurance services in line with the carbon emissions inventory baseline and
The services included: process and selected information provided by establish a carbon reporting process within the
• obtaining understanding the target entities; the Ministry for the 2019 Green Sukuk – group for future years’ reporting. This project
• reviewing compliance and assess gaps; Allocation and Impact Report (“Green Sukuk included identifying carbon emissions reduction
• assessing ESG risks - Based on historical 5 Report). The Green Sukuk is the government of opportunities and developing a sustainability
years and future documented plan, Indonesia’s first Islamic financing green debt report.
Identification of potential condition precedent instruments which has been deployed to target
/ condition subsequent, assess and evaluate five key areas, comprising renewable energy,
client’s ESG monitoring metrics and potential energy efficiency, disaster risk reduction, waste
ESG-based investment decisions and to energy, and sustainable transport.
Identification of opportunities in the revenue
and cost levers;
• Preparing a high level ESG Action Plan to
identify and provide recommendations.
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Our Specialists
PwC offers sustainability services globally and across Asia-Pacific
Our strategic partnerships: we have We routinely hold several events/webinars that provide ESG-related insights:
• Enhancing your ESG Reporting (August 2022)
strong alliances, partnerships, and • Operationalising ESG: moving from value preservation to value creation (July 2022)
agreements with external organisations • IPO Readiness & ESG Considerations (March 2022)
• ESG in Journalism (March 2022)
around sustainability issues. • ESG Considerations for Japanese Companies in Southeast Asia (February 2022)
• Carbon Tax & Carbon Pricing: Considerations for the Indonesian Power Sector (November 2021)
• ESG Value Creation Journey in the Palm Oil Industry (October 2021)
• Editor’s Forum: ESG in Business (August 2021)
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PwC has released several publications on ESG-related topics
Global Asia Pacific / SE Asia Indonesia
PwC’s Global Investor Survey (2021) Sustainability Counts (2022) Indonesia’s Green Taxonomy
prompts focus on ESG value
Investors are focused on how companies Jointly published by PwC and the National creation (2022)
are managing environmental, social and University of Singapore (NUS) Centre for
Governance and Sustainability (CGS), this PwC Indonesia analyse the impact of
governance (ESG) issues. The survey
report pulls together the developments in the Indonesian Green Taxonomy and
highlights issues that businesses need to
global sustainability reporting and discuss how companies can respond to
pay attention and respond accordingly in
sustainability reporting requirements and this regulatory change.
order to appeal to the concerns raised by
potential investors. recommendations in respective
jurisdictions.
State of Climate Tech (2021) Rethinking ESG in a post Plantation NewsFlash: A Recovery
COVID-19 world (2020) Momentum and Journey to
PwC’s analysis this year explores how Sustainable Industry (2021)
investors are securing both climate impact Our case studies highlights that in an effort
and commercial returns from this to emerge stronger from COVID-19, it is This report highlights that Indonesian
emerging asset class, helping keep the imperative for businesses to rethink their palm oil companies are able to mitigate
Paris Agreement’s goal, of limiting global ESG commitments. It require combined key Environmental, Social and
warming to below 1.5 degrees Celsius, efforts from businesses, the government, Governance (“ESG”) risks by being
within reach. and the public to plan and drive proactive.
improvements over the long term.
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Our Indonesia ESG Specialists
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Our Asia-Pacific ESG Specialists
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Thank you
pwc.com/id
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
PwC Indonesia is comprised of KAP Tanudiredja, Wibisana, Rintis & Rekan, PT PricewaterhouseCoopers Indonesia Advisory, PT Prima Wahana Caraka, PT
PricewaterhouseCoopers Consulting Indonesia, and Melli Darsa & Co., Advocates & Legal Consultants, each of which is a separate legal entity and all of which
together constitute the Indonesia member firm of the PwC global network, which is collectively referred to as PwC Indonesia.
© 2022 PwC. All rights reserved. PwC refers to the Indonesia member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity.
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