In an investment or business context, ROI measures the extent to which the investment or business decision produces profits that are greater than the costs incurred. ROI is a commonly used metric to evaluate investment efficiency and performance.It is important to note that in the context of climate investment in Indonesia, ROI includes not only financial returns but also broader social and environmental benefits. For example, reducing carbon emissions or reducing environmental impact can provide long-term value that is difficult to measure directly in numbers, but remains an integral part of a comprehensive ROI.
SROI in Climate Investment in Indonesia
SROI is a more holistic tool for measuring climate investments within an ESG framework. SROI focuses on measuring the social, environmental and financial impact of an investment or business decision. SROI is more comprehensive because it tries to combine all of these elements in one metric. It attempts to measure the social, environmental, and financial impacts generated by the investment. In Indonesia, SROI can be used to measure positive impacts on local communities, reductions in carbon emissions, and positive changes in sustainable practices.
For example, a company investing in a reforestation project in Indonesia will not only measure the financial benefits of the investment but also the social impact in terms of new jobs created and the positive impact on the well-being of local communities. SROI allows companies to more holistically measure the impact of climate investments and understand the long-term value of those investments.
Challenges in Measuring ROI and SROI in Indonesia
Although ROI and SROI are powerful tools for measuring climate investments within an ESG framework, there are challenges in collecting accurate and relevant data in Indonesia. Some challenges include:
- Limited data availability, especially in terms of detailed environmental data.
- Measuring social impact is often subjective and requires a careful approach.
- Limitations of standard methodologies for measuring SROI that are relevant in the Indonesian context.
Conclusion
Climate investment within an ESG framework in Indonesia is an important step towards sustainable development. ROI and SROI are important tools for measuring the impact of these investments, both in terms of financial returns and broader social and environmental impacts. Despite challenges in collecting relevant data, companies in Indonesia must commit to measuring and reporting the impact of their climate investments in order to drive greater positive change in protecting the environment and societal well-being. Thus, climate investments in Indonesia not only generate financial returns, but also contribute to greater sustainability for all stakeholders. Indonesia, like other countries, is trying to face the challenge of climate change and implement ESG principles in business activities and public policy. Although there is still work to be done, the steps that have been taken demonstrate a commitment to achieving sustainable development and reducing negative impacts on the environment and society. With support from the private sector, government and society, Indonesia can continue to progress in implementing ESG principles and contribute to climate change mitigation globally.
Sources
https://www.sustainahaus.com/articles/esg-trend-in-indonesia
New ESG Intelligence Report Shines a Spotlight on Indonesia's Long-Term Opportunities Amid 2022 G20 Presidency (pwc.com)
