ESG Value

Creation Journey

PwC Indonesia Statement of Capabilities

November 2022

Strictly private and confidential

Disclaimer

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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The documents, or information obtained from PwC, must not be made available or copied, in whole or in part, to any other
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 Table of contents

Introduction 4

ESG Value Creation Journey 5

Sustainability Reporting, Ratings, and Indices 15

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

What is ESG and what do we mean by ESG factors?

ESG is a set of non-financial performance indicators that can be used to better understand material risks and opportunities related to
sustainability. Investors and stakeholders are interested to understand ESG-related risks by analysing strategies and activities which can
quantify adverse risks associated with your industry and company. Some examples of ESG pillars can include:

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

Financing Opportunities Access to Corruption &

Raw material Electronic Human Capital Financial
environmental in renewable health care Ownership instability
sourcing waste Development product safety
impact energy

Climate Supply Chain Opportunities Financial

Privacy & data in nutrition &
change Labour Accounting system
security health
vulnerability Standards instability

Inclusion and Responsible Tax

diversity investment transparency

Source: MSCI ESG Measurement Metrics Health &

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 Illustrative

Why does ESG matter?

Focusing on ESG is about value preservation (at a minimum) and value creation by optimising the use of key business drivers
and capitals in your company. Inaction can therefore lead to value destruction. Value creation
through sustainable
Company Value preservation through transformation
value Value erosion from ESG performance
ESG headwinds improvement

customer increased ESG review & proactive climate strategic new product/ brand value
value switching regulatory remediation impact resilience realignment to service and multiple

levers costs mitigation measures sustainable

transition
offerings enhancement

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

How can ESG create value?

ESG can create financial value for companies in the long-term from cost reduction, productivity, new revenue
and access to finance. MSCI study indicates that higher ESG scores can reduce the cost of capital by up to
1.14 per cent while other studies indicated that it could be as much as 10 per cent.

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

Source: MSCI, PwC Analysis

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 Illustrative

ESG factors can impact financial performance in various ways

ESG factors can have direct and indirect impact on a company’s balance sheet. Having a comprehensive ESG strategy,
which is integrated into your corporate strategy can create financial and non-financial value over an extended period of time.

Factors Impact

1. Customer demand for ESG-driven

Top line growth
companies and products

2. Emissions reduction Cost reduction

Tax credits, subsidy eligibility,

3. Regulatory compliance
avoid penalties

4. Purpose driven workplace Increased productivity

5. Investment in green technology

Asset optimisation
and green assets

Source: McKinsey & Co. PwC analysis.

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How does ESG inform investment decisions?
Over the past 10-15 years, we have witnessed the emergence of new and innovative approaches to investment that seek to balance financial
and social returns.Traditional philanthropists and donors rely more and more on innovative financing schemes to leverage investment finance
alongside more traditional development assistance.

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

Financial <> social return expectation

Source: OECD, 2019. PwC analysis

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 Illustrative

ESG value creation journey

Your ESG journey must take a holistic approach and consider Implementation Monitoring & Evaluation
relevant capitals and stakeholders to optimise value creation
4 review ESG integration &
implementation
ESG Strategy Development
quantify & monetise ESG
re-evaluate ESG risks &
pressures

awareness raising Update / amend strategy

set ambitions / objectives 3
capacity building
2 benchmarking analysis
ESG initiatives
Identify risks & opportunities
structure, processes, culture, infra
1 Understanding ESG gap analysis
ESG measurement

Driving Levers non-financial reporting & assurance

STAKEHOLDERS CAPITALS

Investors / Board Suppliers Social &

Government Community Consumers Employees Financial Manufactured Intellectual Human Natural
Shareholders Relationship

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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

Net-zero Sustainability Dissemination

strategy reporting Shareholders and
stakeholders gaining
Developing an Sustainability
confidence as a result
emissions reduction reporting and/or
of the company’s
strategy which may disclosure of ESG
actions to seize ESG
include net-zero performance
opportunities and
targets
manage and mitigate
risks
● Can be developed in parallel
● Depending on the industry, other strategies may
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Starting your ESG journey

Step Description Action Item

Sustainability strategy that reflects company and board’s vision Incorporate an ESG/sustainability strategy into your
1. ESG Strategy corporate strategy
around ESG

Map out your GHG emissions across scopes 1 through 3 in

Emissions reduction strategy that identifies critical sources of
GHG
2. Net-zero strategy line with your materiality assessment and develop science-
GHG emissions and develops a path towards net-zero targets
based targets to reduce emissions / achieve net-zero

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

PwC’s Corporate Sustainability Framework

● 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

The sustainability landscape is continuously evolving, with different

components and companies offering multiple services

Sustainability Frameworks Sustainability Standards Harmonising Sustainability Standards

Sustainability Ratings Sustainability Indices

Source: Positive Investment Imperial, PwC Analysis

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Frameworks, standards, indices, and ratings are built to tackle different
problems throughout the sustainability landscape
Sustainability Frameworks Sustainability Standards Sustainability Ratings Sustainability Indices

• 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

• Connects sustainability ● Covers two methods for

disclosures to other developing companies’
• Covers climate-related
• 34 topic-specific standards: disclosures in financial science-based targets: the
metrics • Capture environmental • Covers greenhouse gas
organized into EES series reporting: 1) business model; Absolute Contraction
• Covers four key areas: performance data related to emissions metrics
Areas Covered • Covers a wide set of
governance, strategy, risk
2) strategy; (3) resource
GHG emissions, water,
Approach (used by four out of
• Three scopes are set out:
disclosures across all EES allocation; 4) performance five companies with approved
management, and metrics & forests, and supply chain. scope 1, 2, and 3 emissions.
components and risks; and 5) science-based targets) or the
targets
opportunities and Sectoral Decarbonization
governance, among others Approach (SDA).

● 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

Websites globalreporting.org fsb-tcfd.org integratedreporting.org cdp.net sciencebasedtargets.org ghgprotocol.org

Source: Positive Investment Imperial, Company/institution websites, PwC Analysis

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Reporting standards represent global best practice for reporting on a
range of ESG impacts

A set of accounting standards

Tools for quantifying and
from the newly created ISSB that A set of Stakeholder Capitalism Merger between SASB and
SASB standards are based Advancing and aligning the global reporting GHG emissions from
will consolidate the SASB and Metrics (SCM), drawn from existing Integrated Reporting (IR) to align
on a complete set of 77 mainstream corporate reporting products by the largest
Key Features CDSB standards and create the standards and offers comparable standards and provide a
industry-specific standards model to equate natural and social international standard setting
global benchmark for metrics and disclosures across four comprehensive approach to long-
and associated metrics capital with financial capital board for use in emissions
sustainability disclosure in pillars term value creation
trading schemes
financial markets

• Covers five pillars: 1) natural,

• Covers four pillars: principles of • ISO14007: Determining
human and social capital
governance, planet, people, and • 26 sustainability issues, Environmental Costs &
• Architecture of ISSB • All areas covered by SASB dependencies; 2)
prosperity categorised as five broad Benefits
standards include three and IR, along with the six Environmental and social
• Incorporated a set of 21 core sustainability dimensions: • ISO14008: Monetary
things: 1) General Integrated Thinking results; 3) Environmental and
quantitative metrics and environment, social Valuation of Environmental
Areas Covered requirements for disclosures
disclosures
Principles: purpose, strategy,
capital, human capital,
social risks and opportunities;
Impacts & Aspects
around things; 2) Climate risks and opportunities, 4) Environmental and social
• Covers a set of 34 expanded business model and • ISO14030: Green Bonds
risk; 3) Industry-specific culture, governance, and policies, strategies, and
metrics and disclosures that innovation, and • ISO14097: Climate
requirements. performance targets; 5) Performance
tend to have a wider value chain leadership & governance Related Metrics for the
against environmental and
scope Finance Sector
social targets

• 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

Websites ifrs.org weforum.org valuereportingfoundation.org sasb.org cdsb.net iso.org

Source: Positive Investment Imperial, Company/institution websites, PwC Analysis
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The different ESG ratings and scores are used by investors to support
their investment and funding decisions

• 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

450+ data points, ratios and 1000+ data points per

Data Points 1000+ data points undisclosed undisclosed
analytics company
undisclosed

Corporate publication and Online questionnaire Online questionnaire

Gov’t and NGO reports, company Publicly available data and Corporate, publicly reporting
Data Sources reports, media
regulatory filings, NGO
industry data data, global media sources
supported by company supported by company
reports, media documents documents

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

• Broad applicability • Risk focused Outside-in-approach to • Transparent and Industry-specific data on

Industry-specific data
Insights • Largest provider of ESG • Product offerings are assess company on-the- auditable data
collection methodology
climate change, forests, and
Indices globally ESG specific ground performance • Distinct scoring methods water sec.

Websites msci.com sustainalytics.com reprisk.com refinitiv.com spglobal.com cdp.net

Source: Positive Investment Imperial, Company/institution websites, PwC Analysis

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 The Indonesian Stock Exchange (IDX) has released four ESG indices to
date, covering different segments of the market
ESG Indices released by IDX as of March 2022
Number of Parties
Index Name Launch Coverage Selection criteria
constituents responsible

Three-phase ESG assessment:

Top 25 ESG performing Phase 1: Filtering Financial and Liquidity Aspects KEHATI1
SRI-KEHATI June 2009 25
stocks on IDX and IDX
Phase 2: Filtering Core Business
Phase 3: Assessing Companies’ ESG Aspects

Three-phase ESG assessment:

ESG Quality 45 Top 45 ESG performing Phase 1: Filtering Financial and Liquidity Aspects2 KEHATI and
December 2021 45
IDX KEHATI stocks on IDX Phase 2: Filtering Core Business IDX
Phase 3: Assessing Companies’ ESG Aspects

All above-average ESG Three-phase ESG assessment:

ESG Sector performing stocks in their
unfixed, Phase 1: Filtering Financial and Liquidity Aspects KEHATI and
Leaders IDX December 2021
currently 48
respective sectors Phase 2: Filtering Core Business4 IDX
KEHATI (12 sectors based on IDX- Phase 3: Assessing Companies’ ESG Aspects
IC3)
Three selection criteria:
Criteria 1: Companies with involvement in controversies
Top 15 - 30 ESG category 4 and 55 are excluded
IDX ESG
December 2020 15 - 30 performing stocks on IDX Criteria 2: Companies with ESG risk rating category of
Leaders IDX
(Sustainalytics Ranking) high and severe6 are excluded
Criteria 3: From the remaining universe, companies that
have the lowest ESG risk rating7 are selected (with
minimum 15 constituents and maximum 30 constituents)
Note: 1) Indonesian Biodiversity Foundation; 2) Financial Indicators: Profitability (ROE), Earning RIsk (EPS Volume), and Financial Risk (Leverage); 3) IDX Industrial Classification; 4) Sectoral diversification through IDX Industrial Classification (IDX-
IC)
5) Sustainalytics define Category 4 and 5 as controversies with High and Severe Impact respectively on environment, society and business risk.; 6) ESG Risk rating of 30 and above; 7) ESG Risk Rating between 0-30 (negligible, low and medium
risk)
Source: Indonesian Stock Exchange, KEHATI, Kontan
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KEHATI has been actively involved in developing the Indonesian
ESG investing landscape since 2009 and now manages three ESG
indices
KEHATI at a glance KEHATI index constituent selection process

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

Key engagement programs Phase 1 Market Average Trading

Total Assets Net Profit Free Float
Capitalisation Value
1 Grants programs1
Grant collection, managing, and distribution to preservation of
forests, agriculture, and marine ecosystems. Worked with 1000+
Filtering Core Businesses (Controversial Screening)
institutions and managed >USD 200 million.
Pesticides Alcohol
2 Green investment Pornography
Phase 2 Nuclear
ESG investments, in the form of indices which are available as Gambling
Weaponry
mutual funds to the public in collaboration with IDX and asset Genetically Modified Organisms
managers. Total AUM as of December 2020: >USD 220 million. Tobacco Coal Mining

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

1,000+ 172 138

clients countries covered sub-industries 2. Manageable Risk Analysis of risks manageable through
company ESG programs and policies
Sustainalytics ESG Risk Ratings Categories
3. Unmanageable Analysis of risks that cannot be managed
● Based on their quantitative Risk by the company
scores out of 100, companies Rating Scale
are grouped into one of five risk
categories
Category 1: Negligible (0 - 10) Analysis of the manageable risks that
● These risk categories are 4. Managed Risk
absolute, meaning that a ‘high have been managed by the company
risk’ assessment reflects a Category 2: Low (10-20)
comparable degree of
unmanaged ESG risk across all Reflects manageable risks that are not
sub-industries covered.
Category 3: Medium (20-30) 5. Management Gap managed by the company
● This means that a bank, for
example, can be directly Category 4: High (30 - 40)
compared with an oil company or
any other type of company. Overall risk that is not yet managed - ESG
Category 5: Severe (40+) 6. Unmanaged Risk risk rating is determined by adding up
total unmanaged risk

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

PwC Indonesia’s ESG services

Strategy &
Climate Operations Disclosure Finance
Transformation

• Sustainability • Mitigation & • Sustainable • Disclosure/reporting • ESG M&A due

strategy adaptation strategy operations & strategy diligence
• Net zero strategy • Carbon tax advisory procurement • Sustainability • ESG Value Creation in
(value creation services)

• Stakeholder • Impact measurement • Impact measurement reporting (data Deals

engagement strategy & management approach, controls,
ESG Integration

and management • ESG readiness

• Social impact • Sustainable supply quality) assessment
• Climate change
strategy chain strategy • Internal audit
vulnerability • Responsible investing
assessment optimisation, and strategy & capacity (framework &
• Scenario analysis management building upskilling)
• Net zero business • ESG tax risk mitigation • Sustainability • Sustainable finance
transformation • ESG due diligence assurance (e.g. thematic bonds,
• Carbon • Training & capacity • ESG risk assurance blended finance,
reduction/abatement building sustainability-linked
• Human rights impact loans)
• Carbon market/offset
assessment

PwC 26
 Non-exhaustive

Our credentials (1/2)

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

Overview Overview Overview

PwC was engaged by the client to develop its The assessment involved the identification and PwC was engaged for the development of the
corporate sustainability framework to help drive prioritisation of key sustainability risks at both SDGs Financing Hub which is intended to
the implementation of sustainability across the Group and divisional level. Key priority areas reduce the financing gap towards the SDGs.
organization. The work include developing that were currently not being adequately This is expected to be established under the
materiality matrix by conducting series of addressed by the company were also identified. Ministry of National Development Planning
workshop with BoD and senior management as The assessment enabled the company to (Bappenas) to facilitate and strengthen the role
well as with the 11 divisions within the develop strategies and mitigating actions for of the existing SDGs Secretariat. PwC provided
Group. The project also covered development addressing its key sustainability risks. We also integrated services, including sustainability
of a five-year sustainability roadmap for developed a global carbon inventory baseline services, to support UNDP and Bappenas in
corporate-wide and its business divisions. We for our client and establishing a carbon developing the business case for a sustainable
also helped them develop their first reporting process within the group for future operating model.
sustainability report in accordance with GRI G4 years’ reporting. We identified emissions
guidelines. reduction opportunities and developed a carbon
reduction roadmap.

PwC 27
 Illustrative

Our credentials (2/2)

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.

PwC 28
Our Specialists
PwC offers sustainability services globally and across Asia-Pacific

We have more than 800 sustainability and

ESG professionals in more than 60
countries across our global network. Our
global strategy, The New Equation, places
ESG at the centre of all our services,
activities, and operations. It further specifies
that PwC will create 100,000 new jobs over
the next five years (2021-2026) focused in
emerging capability areas, including ESG.
Dedicated sustainability team
Formally supported by another territory

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.

Code Red – Asia Pacific’s Time To Indonesia's Sustainable

Are you ready for the ESG
Go Green (2021) Transformation (2021)
revolution? (2021)
At the business level, the report
This publication highlights three This report examine why businesses are
outlines the role of corporate ESG
dimensions of the ESG revolution that rising to the challenge in Asia-Pacific and
strategy in long-term value creation,
social and business need to considered of: must partner with the Government. Our
and evaluates the incumbent
Strategic reinvention, Reimagined case studies highlights examples of
challenges in ESG reporting and
reporting, and Business transformation. businesses setting the tone from the top
benchmarking in the Indonesian
and delivering transformative change as
context.
they transition to net zero.

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.

PwC 31
Our Indonesia ESG Specialists

Julian Smith Radju Munusamy Pieter van de Mheen

Advisor ESG Value Creation Advisor Advisor
PwC Advisory Indonesia PwC Advisory Indonesia PwC Consulting Indonesia
Key expertise: responsible investing & Key expertise: ESG value creation in deals Key expertise: sustainability strategy &
sustainable finance & strategy operations

Sacha Winzenried Yuliana Sudjonno

Jasmin Maranan
Advisor ESG Reporting Advisor
Advisor
PwC Assurance Indonesia PwC Assurance Indonesia
PwC Assurance Indonesia
Key expertise: sustainability reporting & Key expertise: good governance, internal
Key expertise: sustainable finance & IPOs
assurance audit strategy & capacity building

Yanto Kamarudin Maurice Shawndefar

Antonius Sanyojaya Advisor
EU&R ESG Co-Leader
Carbon Tax Advisor PwC Advisory Indonesia
PwC Assurance Indonesia
PwC Tax Indonesia Key expertise: ESG strategy & sustainable
Key expertise: sustainability reporting &
Key expertise: Carbon tax finance, reporting frameworks and
assurance
standards, investor requirements

PwC 32
Our Asia-Pacific ESG Specialists

Ivy Kuo Denis Daley

ESG Services Partner Lit Ping Low ESG Managing Director
PwC Advisory China Climate Change Partner PwC Assurance Singapore
Key expertise: Sustainability, PwC Assurance Hong Kong Key expertise: liability portfolio
entrepreneurship, customer-centric and digital Key expertise: climate risk & reporting management & remediation (LPMR) &
strategy development, urbanization ESG due diligence

Eu-Lin Fang Keagan Rubel

Andrew WK Chan Sustainability Leader Sustainability Services Director
ESG Strategy Leader PwC Assurance Singapore PwC Assurance Singapore
PwC Southeast Asia Consulting Key expertise: Strategy, climate risk, Key expertise: Corporate sustainability
Key expertise: strategy & climate change decarbonisation, impact, SDGs, reporting strategy, climate change, ESG risk
& assurance management, reporting, due diligence

Jeremy Prepscius Sean Purdie Robert Pedler

ESG Supply Chain Advisor Energy Transition Advisor Digital Transformation Advisor
PwC Assurance Hong Kong PwC Assurance Hong Kong PwC Assurance Australia
Key expertise: Sustainability supply Key expertise: Energy transition, Key expertise: Digital ESG solutions,
chains, human rights, supply chain and renewable energy, power, decarbonisation sustainability information systems
scope 3 engagement, ESG strategy

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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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