The increasing issue of environmental degradation has driven companies to adopt ESG (Environmental, Social, and Governance) principles in their operations. ESG has become a crucial guideline for investors and clients in selecting companies that responsibly manage their funds.
“Do something now that your future self will thank you for later,” said Nicky Perdhana, FRM, MBA, Senior Relationship Manager, FIG & Public Sector at HSBC Indonesia, during a guest lecture titled “ESG Strategy for Banks and Financial Institutions” at the SBM ITB on Tuesday (7/8).
Nicky emphasized the importance of sustainable strategies across all industrial sectors, including banking. He noted that ESG is critical in long-term risk assessment and investment decision-making. Among the three pillars of ESG, environmental issues are considered the most crucial, as environmental damage has a direct and lasting impact on a business’s ability to operate.
As a result, banks are becoming increasingly selective in providing funding to companies, as it forms part of banking’s risk management, particularly in mitigating reputation risk.
“ESG risk management is essential to ensure that industries are not adversely affected by climate change and environmental challenges,” he stated.
Nicky highlighted that environmental damage has become a global concern, leading to the Net Zero 2050 target, which aims to prevent future environmental crises. At COP28 in Dubai, countries reaffirmed their commitment to the Paris Agreement goal of limiting global temperature increases.
He also predicted that within the next decade, global risks will escalate due to extreme climate change. Banking will be pivotal in sustainable financing initiatives, such as green bonds and solar panel programs. Nicky underscored the importance of reducing carbon emissions, particularly in manufacturing, real estate, and transportation.
“Indonesia must face the Indonesia Emas 2045 challenge with the Net Zero Emission 2050 mission. This is a challenge for our generation to drive Indonesia’s progress through renewable energy,” Nicky remarked.
In closing, Nicky asserted that banks must manage risk through ESG to ensure long-term survival. ESG serves as a framework for effective risk management.
