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Jakarta, Dec 21: The government continues to promote investment or investment in the green economy sector. Indonesia does have great potential in this sector. Bank Indonesia projects that the potential investment value in the business sector related to the green economy will reach more than 600 billion US dollars. A number of sectors are predicted to become the prima donna of green investment next year, including the development of new, renewable energy and the development of the electric vehicle ecosystem.
The large green economy prospects require support from other sectors, such as the financial and private sectors. This is because the State Revenue and Expenditure Budget is estimated to only be able to support around 34 percent of green investment needs. Not surprisingly, in the past year, the banking and financing industry has increasingly issued green investment instruments in the form of green bonds . Based on data from the national banking industry, as of the third quarter of 2022, a number of national banks have distributed more than IDR 690 trillion in green credit.
However, the true green economy and investment is not only related to these sectors. More broadly, a green economy is a process of economic development that takes into account environmental impacts, such as carbon levels in the air, efficiency of natural resources, and social impacts. The green economy focuses on environmentally friendly projects or businesses, which in practice apply environmental , social and governance (ESG) concepts so that businesses can remain sustainable and maintain their impact.
Unfortunately, in Indonesia, the importance of applying the ESG concept is still not understood and realized, especially at the micro, small and medium enterprise level. In fact, according to Inez Stefanie, Co-Founder of Supernova Ecosystem, the application of the ESG concept is the first step so that a business can carry out business practices in accordance with the concept of a green economy, namely sustainability.
According to Inez, it is the lack of awareness of applying the principles of good business governance that has become an obstacle for business actors in Indonesia when they want to move up the level of developing their business. “Many companies whose governance practices are not solid, as a result they find it difficult to get funding (investment) from other parties.” Therefore, it is important for business actors to start applying the principles of good business governance in order to maintain the continuity of their business.
On the other hand, the increasing trend of channeling green financing or investment has also increased public interest in entering this sector. One thing that needs to be noted, said Inez, even though business actors in the green economy sector are encouraged to apply ESG principles and concepts in running their business, there are a number of things that investors who are interested in entering this sector must understand.
“In principle, investors who enter the green economy sector must also understand the fundamentals of the business they choose as an investment portfolio,” said Inez. As an illustration, when entering a business sector related to plantation commodities, investors must understand the prospects of the commodities being offered. “Investors must know how the commodity will be sold, who the buyers are, and what the prospects are going forward.” In addition, investors must also be able to read natural conditions that can affect the production results of the selected business.
Actually, Inez added, investing in the green economy sector is the same as investing in the conventional business sector. The principle of prudence and selectiveness in choosing a portfolio is absolutely necessary. “Investors still need to pay attention to the credibility of the aggregator platform that offers investment products, and assess the investment returns offered, realistic or not.” One other thing that is no less important, said Inez, is adjusting the risk profile of an investment product to the characteristics of each investor.
Climate Change Focus
Inez also highlighted that the MSME sector, which is strengthened by more than 62 million businesses, with nearly 99 per cent of them being micro-enterprises, requires major support in order to drive the country’s development in the future. Investors also have great potential to look at them. “Because a successful green investment doesn’t have to be the size of a unicorn,” added Inez.
Unfortunately, apart from the weak implementation of ESG, many businesses in the MSME category do not have a strategic growth plan making it difficult to develop and be sustainable in the future. This is what drives Supernova Ecosystem to go to districts in Indonesia in supporting the development of sustainable investment ( impact investment ) with a focus on climate change issues. Meanwhile, the business sector which is the area worked on by the Supernova Ecosystem is a sustainable commodity.
“We are helping businesses in various regions in Indonesia to create a new economic vortex in areas that have so far depended on extractive economic practices (natural resource management), such as mining and palm oil,” Inez said.
He gave an example, for decades, people in an area have worked in plantations or mining. If in that area there is potential for a plant center to be built for commodities that do not damage the forest, then the Supernova Ecosystem can support this effort. “Currently we are focusing on commodities that have proven to be resistant to pandemic situations, namely beauty, health and wellness. Now we have eight companies in our portfolio to do business on a B2B and B2C basis, with various commodities, such as snakehead fish and tengkawang,” he added.
All companies in the Supernova Ecosystem portfolio are certainly encouraged to practice ESG. “We do not deny that the market for beauty, health and wellness products is very large in the Java region. But we have a framework called the value chain collaboration canvas which maps from upstream to downstream which identifies the added value process of this commodity and we are slowly bringing it to the on site or region,” added Inez.
For example, for a snakehead fish processing business located in Sintang, about 8 hours from Pontianak, the output is only smoked fish, shredded fish and others. However, with the help of partners from the Supernova Ecosystem, this snakehead fish can be extracted into albumin which can heal wounds faster, so that the product has better prices and margins.
“We continue to look for success stories from various regions to show that in the future, communities can run businesses with environmentally friendly and sustainable practices, and can maintain an economic balance between sustainable commodities and extractive commodities,” he said.
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