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CENTRE FOR ENERGY, PETROLEUM AND MINERAL LAW AND POLICY

STATEMENT OF ORIGINALITY

I.D. STUDENT: 090012980

PROGRAMME: LLM in Mineral Law and Policy

MODULE: Code CP52022Name Mineral Resources Policy and Economics

TITLE OF THE RESEARCH PAPER: Challenges for Sustainability Index: Is Being “Green”

Economically Viable for Indonesian Mining Companies?

ABSTRACT: Starting June 2009, Indonesia Stock Exchange in cooperation with environmental NGO,

Yayasan KEHATI, formed a sustainability index named SRI-KEHATI. The Index is

based on Sustainable and Responsible Investment’s standard of assessment. SRI-

KEHATI enlisted only companies that being considered gave excellent performance both

in stock market and sustainable development. Sustainable index itself has been

recognized as a reliable benchmark for the Sustainable and Responsible Investment

worldwide. However, SRI-KEHATI has brought up controversy as it enlisted three

mining companies on its index; PT Aneka Tambang Tbk, PT Timah Tbk, and PT Bukit

Asam Tbk. This research is questioned whether any economically viable for the mining

companies could be gained in stock market by being enlisted on sustainability index. This

paper shall introduce the implementation sustainability index and up bring the

examination of the benefits of being listed on the sustainability index vis a vis the market

capitalization of the mining companies. The objective of the paper is to find any

influence of the sustainability index to the mining companies’ position in stock market

along with the increasing of the companies’ corporate social and environmental

responsibility. Some economy tools will be used to examine the profitability of the three

mining companies before and after being enlisted on SRI-KEHATI index. Interview with

each company’s corporate secretary also being conducted in Indonesian language to

extract the company’s own perspective on the issue itself.

WORD COUNT: 3,285 (including footnotes)

PRESENTED TO: Prof./Dr/ Mr/Mrs DIRECTOR OF THE MODULE Phillip Crowson

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CONTRACT CONCERNING PLAGIARISM

I, the undersigned, have read the Code of Practice regarding plagiarism contained in the Students' Introductory Handbook. I realise that this Code governs the way in which the Centre for Energy, Petroleum and Mineral Law and Policy regards and treats the issue of plagiarism. I have understood the Code and in particular I am aware of the consequences, which may follow if I breach that code. I also authorise the centre to scan the e-copy of my research paper through the Plagiarism Detection Software to detect plagiarism

SIGNED: ____________________________Date: 29 – January - 2010

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TABLE OF CONTENTS :

ABBREVIATIONS

1. INTRODUCTION …………………………………………………………………………… 6

2. OVERVIEW OF SUSTAINABILITY INDEX IN INDONESIA ………………………… 7

2.1. Background of Sustainability Index in Relevance with SRI ………………………….... 7

2.2. SRI-KEHATI : Behind the Index ……………………………………………………….. 9

3. METHODOLOGY …………………………………………………………………………… 103.1. Interview with Corporate Secretary of ANTAM and Corporate Secretary of TINS ... 103.2. Analyze based on Financial Data ………………………………………………………... 10

4. FINDINGS ……………………………………………………………………………………. 114.1. Controversy of Enlisting Mining Companies in SRI-KEHATI ……………………….. 114.2. Economically Viable vs. Non-economically Benefits on Being ‘Green’ ……………….. 12

5. CONCLUSION ………………………………………………………………………………. 15

6. LIST OF FIGURES

1.1 Share Price ANTAM, TINS, and PTBA Per June 2009 to January 2010

1.2 SRI-KEHATI Index

1.3 TINS 2008 – Realization of Partnership Programme Fund 2003-2008

7. BIBLIOGRAPHY …………………………………………………………………………......17

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ABBREVIATIONS

IMA Indonesian Mining Association

UNPAD Universitas Padjajaran

ISEAS Institute of South East Asian Studies

MC Mining Code

WB World Bank

NGO Non-Governmental Organization

CaIPERS California Public Employees Retirement System

NYCERS New York City Employee Retirement System

SRI Sustainable and Responsible Investment

PRI Principles of Responsible Investment

GRI Global Reporting Initiative

CSR Corporate Social Responsibility

CD Community Development

ESG Environmental, Social and Corporate Governance

SI Sustainable Investment

RI Responsible Investment

Eurosif European Sustainable Investment Forum

USA United States of America

UK United Kingdom

HNWI High Net Worth Individuals

IDX Indonesian Stock Exchange

BAPEPAM-LK The Indonesia Capital Market and Financial Institution

Supervisory Agency

BAPEPAM former abbreviation of BAPEPAM-LK

ANTAM PT Aneka Tambang, Tbk

PTBA PT Bukit Asam, Tbk

KEHATI The Indonesian Biodiversity Foundation

NYSE New York Stock Exchange

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DJSI Dow Jones Sustainability Index

ASX Australian Stock Exchange

AuSII Australian SAM Sustainability Index

DJIM World Index The Dow Jones Islamic Market World Index

JSE Johannesburg Stock Exchange

LSE London Stock Exchange

FTSE Financial Times Stock Exchange

Bovespa Brazilian Stock Exchange

ASPI Advanced Sustainable Performance Indices

TINS PT Timah Tbk

GCG Good Corporate Governance

JATAM Mining Advocacy Network

WALHI The Indonesian Forum for Environment

ASM Artisanal and Small-Scale Miners

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1. INTRODUCTION

In June 2009, The Indonesian Biodiversity Foundation (“KEHATI”) in cooperation with

Indonesian Stock Exchange (“IDX”) officially launched SRI-KEHATI1. The index is enlisting

25 public-listed companies based on particular requirements2. All were chosen by KEHATI

based on each company’s excellent performance on CSR, CD and environmental management in

recent years3.

By nature, KEHATI emphasizes more on the environmental management for evaluating

the companies being enlisted on the index4. This is another reason why SRI-KEHATI become

widely-known as the ‘green index’ rather than sustainable index.

As SRI has become a rising trend in investment in the last decades, enlisted in a

Sustainability Index would enrich a public-listed5 company portfolio. Thus, this would lead to

higher opportunities for the company to attract more investors with particular concerns on ESG

factors6.

In general, Indonesia has low concern on environmental dimension on development7.

Moreover, the business sectors in Indonesia are lack of awareness on environmental damage8.

Although there have been increasing number of companies to go ‘green’, it is still doubtful to

have accelerated profits after being recognized as green company in Indonesia9.

1 SRI-ASIA, First Socially Responsible Investment Index Launched in Indonesia, available at http://www.sri-asia.com/products/kehati-sri-index-2.html, last accessed on 7th January 2010. 2 IDX, Press Release PR No. 16/BEI.SPR/06-2009 on Penerbitan Indeks SRI-KEHATI, available at http://www.idx.co.id/NewsAnnouncements/EventsPressRelease/tabid/124/articleType/ArticleView/articleId/479/Penerbitan-Indeks-SRI-KEHATI.aspx, last accessed on 7th January 2010. 3 Egenius Soda, SRI-KEHATI : The Indonesian Stock Exchange’s “Green Index”, 66 – 67, Majalah Tambang Volume 3 No. 38 (2009) 4 Egenius Soda, Ibid, p.12.5 Rule Number I-A : Concerning The Listing of Shares (Stock) and Equity-Type Securities Other Than Stock Issued By The Listed Companies, Decision of the Board of Directors of the Jakarta Stock Exchange Inc. Number : Kep-

305/BEJ/ 07-2004 19th

July 2004 (entered into force 19th

July 2004)6 Unofficial translation from interview with Abrun Abubakar, Corporate Secretary of PT Timah, Tbk. Interview is exercised on live conversation by using Skype, January 22nd, 2010 to his personal mobile number. Contact : investorrelation@pttimah.co.uk7 Iwan J. Azis and Emil Salim, Development Performance And Future Scenarios in The Context of Sustainable Utilisation of Natural Resources, The Politics and Economics of Indonesia’s Natural Resources (B. Resosudarmo,ed., Singapore : ISEAS, 2005) p.1408 Sudarmadji, Pembangunan Berkelanjutan, Lingkungan Hidup, dan Otonomi Daerah, available at http://geo.ugm.ac.id/archives/125, last accessed on 29th December 2009.

9Andrea Ortega-Wells, It's Not Easy Being Green; But It's Profitable, available at http://www.insurancejournal.com/news/national/2009/04/21/99798.htm, last accessed on 17th January 2010. Also see Joel Makower and Cara Pike, Strategies for Green Economy : Opportunites and Challenges In The New World of Business, (United States of America : McGraw-Hill, 2009) p.25

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This would bring us to the following questions posed in this paper: (i) is being ‘green’

economically viable for the enlisted companies on sustainability index; (ii) are there any benefits

gained other than direct profits for the company for being recognized as green company, and (iii)

is the cost for ESG factors overcome the company’s long-term profits?

The paper would focus only on three mining companies enlisted on the SRI-KEHATI per

June 2009 and October 2009. The papers would identified the concept of SRI and sustainability

index. It also examines the progression on stock prices being against facts based on interviews

with Corporate Secretary of ANTAM and Corporate Secretary of TINS. Regulation served as

primary resources and relevant literature as secondary resources. The last date of data collection

is 26th January 2010.

The paper concludes that non-economical benefits achieved by the mining companies

during the period of enlisted on SRI-KEHATI are larger than its direct profits gained at the

moment. Even though, profits in the stock market gained by the three mining companies were

increasing too.

2. OVERVIEW OF SUSTAINABILITY INDEX IN INDONESIA

2.1. Background of Sustainability Index in Relevance with SRI

The concept of Sustainable and Responsible Investment (SRI) was first introduced as

investment process based on social issues rather than to answers more largely concern and

sustainable issues. Therefore, the abbreviation was stands for Socially Responsible Investment in

the beginning. Socially Responsible Investment has infiltrated the business world since 1969

after some investors brought up resolution of ethical investment as the response of the uprising

Dow Chemical’s case10. In 1984, CaIPERS issued investment guidelines that regard the social

10 Ricardo Bayón, et.al., Towards Sustainable and Responsible Investment in Emerging Markets : A Review and Inventory of the Social Investment Industry’s Activities and Potential in Emerging Markets, available at http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/p_sri/$FILE/SRI_IFC.pdf, p.12, last accessed on December 27th, 2009.

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concern for investing more than 25% of the pension funds it holds11, followed by NYCERS.

Since then socially responsible investment become influential in the global stock markets.

Socially Responsible Investment has grown into more thematic investments along the

changes on global concerns toward sustainability development. Traditional Socially Responsible

Investment still preserved its existence to answer diverse concerns12, but new trend in investment

is being introduced to address sustainability challenges. It is called as Sustainable Investment13

(SI) or otherly known as Sustainable and Responsible Investment14 (SRI).

Eurosif defined SRI as any form of investment that integrated investor’s financial

objectives with their concerns on environmental, social and governance (ESG) issues15. In

Eurosif’s perspective, SRI covers ethical investments, SI, responsible investments (RI), ethical

investments and any other investment process16 that shares similar concerns for financial analysis

and decision-making. But strong supporters of SRI like Pax World insisted there should be

strong line between SRI’s definition and other mission-based investments17.

SRI is about to affiliate assessment on ESG factors with relevant financial performances

by incorporate both accurate financial and proper ESG analysis’s for investing in industry-wide

best practices with sustainable business models18. SRI targeted on companies that implemented

corporate sustainability business approach. They are attractive their business approach is aimed

11 California Public Employees’ Retirement System, Facts at Glances : General, available at http://www.calpers.ca.gov/eip-docs/about/facts/general.pdf, p.5, last accessed on December 27th, 2009, also see Ricardo Bayón, ibid. 12 Andrew L. Friedman, and Samantha MilesSocially, Responsible Investment and Corporate Social and Environmental Reporting in the UK: An Exploratory Study, British Accounting Review (2001) 33, p. 525-526, also in http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6WC3-45K0XBP-F&_user=1669875&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1174454127&_rerunOrigin=scholar.google&_acct=C000054131&_version=1&_urlVersion=0&_userid=1669875&md5=f8186631e9f810d13c99762bc5cd1269, last accessed on 29th December 2009, also see Peter Kinder et.al., Investing For Good: Making Money While Being Socially Responsible (United States, New York : HarperCollins Publisher, 1993) p. 19. 13 Eurosif, High Net Worth Individuals (HNWIs) & Sustainable Investment, available at http://www.eurosif.org/publications/hnwi_sustainable_investment, p.7, last accessed on 29th December 2009.14 Eurosif, Public Policy Paper related to Sustainable and Responsible Investment (“SRI”), p.7, available at http://www.eurosif.org/content/download/1361/7711/version/1/file/Eurosif+Public+Policy+Position+Paper+2009.pdf, last accessed on 29th December 2009.

15 Eurosif, loc.cit. 16 Ibid. 17 Joseph Keefe, Sustainable Investing as An Emergent Investment Discipline, Keynote Speech presented in Sustainable Investing 2008 Conference, New York, United States, 23 September 2008, available at http://www.paxworld.com/pax_code/articles/JKeefe_SIConference_092308.pdf, last accessed on 29th December 2009.18 Joe Keefe, op.cit.

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to enhance the shareholder values in long-term continuously while set high standard on their

management19.

Following the demand of reliable benchmark for SRI, several stock exchanges started to

introduces Sustainability Index20. NYSE launched DJSI and DJIM World Index, LSE launching

FTSE4Good, while European markets established The ASPI Eurozone21. JSE initiated JSE’s SRI

Index22. Bovespa launched the Bovespa Corporate Sustainability Index23, ASX launched

AuSII24, Japan launched Dow Jones Sustainability Japan 40Index25 .

2.2. SRI-KEHATI : Behind the Index

SRI-KEHATI is constructed as a Sustainability Index, a reliable tool for SRI investors to

examine the enlisted companies profitability supported by their environmental, social, and

corporate governance (“ESG”) performance26. The index was designed to address demands on

Sustainable and Responsible Investment (“SRI”) process27. Therefore, the abbreviation of SRI

and KEHATI, as the most influential agency on the index’s assessment, are being used to name

the newly introduced index in IDX.

SRI-KEHATI index is published for public in 8th June 2009 and since then could be

found in IDX 2nd Quarterly Report28 and the following reports afterward. Since it first launch,

SRI-KEHATI only enlisting twenty five companies.

19DJSI, Sustainability Investment, available at http://www.sustainability-index.com/07_htmle/sustainability/sustinvestment.html, last accessed on 8th January 2010.20 Egenius Soda, Melambungnya SRI Indeks, Majalah Tambang Volume 3 No. 38 (2009) p. 18-1921 Pirelli&Co, The ASPI Eurozone® Sustainability Indexes, available at http://www.pirelli.com/web/sustainability/sust_eval/aspi/default.page, last accessed 12th January 2010.22JSE, Live Pricing on JSE SRI Index, available at http://www.jse.co.za/Libraries/SRI_Press_ Releases/Living_Pricing_on_SRI_index_-_9_September_2009.sflb.ashx, last accessed 12th January 2010.23 Índice de Sustentabilidade Empresarial – ISE, Bovespa Corporate Sustainability Index, available at http://www.ifc.org/ifcext/home.nsf/AttachmentsByTitle/ Brazil_Corp_Sus_Index/$FILE/Brazil_Corp_Sus_ Index.pdf, last accessed on 12th January 2010.24 AuSSI - The Australian SAM Sustainability Index, Results of the AuSSI Review 2005, available at http://www.aussi.net.au/aussi_pdf/AuSSI_news/PressReleases/SAM_PressRelease_051024_AuSSIReview.pdf, last accessed on 12th January 2010. 25SAM Sustainable Investing – Dow Jones, SAM and Dow Jones Indexes launch Dow Jones Sustainability Japan 40Index, available at http://www.sustainability-index.com/djsi_pdf/news/PressReleases /DJSI_PressRelease_090731_Japan_40.pdf, last accessed on 12th January 2010

26 Egenius Soda, SRI-KEHATI Hijaukan Bursa, Majalah Tambang Volume 3 No. 38 (2009), p. 11.27 Egenius Soda, Melambungnya SRI Indeks, 18 – 20, Majalah Tambang Volume 3 No. 38 (2009), p. 18. 28IDX, IDX STATISTICS 2nd Quarter 2009, available athttp://www.idx.co.id/LinkClick.aspx?fileticket=MnKPnKn95b4%3d&tabid=185&mid=693&language=en-US, last accessed 11th January 2010.

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. KEHATI claimed they selected the enlisted companies with some levels of selections.

To ensure objectivity and efficiency, KEHATI formed an Independent Committee which

involved KEHATI stakeholders, IDX authorities, and independent representative29. On the early

stage, The Committee would selects public-listed companies with minimum assets of one trillion

rupiah (approximately 100 million USD) by using the financial data provided by IDX.

The Committee then filtered the numbers by examines the companies’ commitment on

GCG, CSR, human rights, and labour30. These fundamental criterions each have its own weight

on the selection process. The data is extracted from appraisal report issued by OWW Consulting

for SRI-KEHATI’s purposes31. SRI-KEHATI will undergo two evaluation periods annually,

October and April.

3. METHODOLOGY

3.1. Interview with Corporate Secretary of ANTAM and Corporate Secretary of TINS

Two separate interviews were made with Corporate Secretary of mining companies

respectively. Until the last day of data collection , questionnaires of interview were only being

responded by ANTAM and TINS. Information was gathered from Bimo Budi Satriyo Corporate

Secretary of ANTAM by electronic mail correspondence in Indonesian language on 22nd January

2010. While Information was gathered from Abrun Abubakar Corporate Secretary of TINS was

taking by notes during live conversation by using international call to his personal number. The

interview meant to extract their companies’ view and experiences being enlisted on SRI-

KEHATI. Both respondents being questioned same issues, that being presented on the

introduction section of this paper.

3.2. Analyze based on Financial Data

Second method of information analyze for this paper is by analyzing fluctuation of SRI-

KEHATI index, fluctuation of ANTAM, TINS, and PTBA’s stock price right before being

enlisted on SRI-KEHATI and after being enlisted on SRI-KEHATI. The data mainly used are

provided by IDX Statistical 3rd Quarter 2009, IDX Monthly Statistic November 2009, and IDX

29 Egenius Soda, op.cit.12.30 Egenius Soda, op.cit.31 Ibid.

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Monthly Statistic December 2009. The data is being compared with ANTAM 3nd Quarter 2009

Financial Report also Sustainable Report 2008 issued by TINS.

4. FINDINGS

4.1. Controversy of Enlisting Mining Companies in SRI-KEHATI

KEHATI aimed SRI-KEHATI to strengthen strategic alliances public participation on

biodiversity and environmental protection32. Nonetheless, controversy still risen against the

listing. It is because ANTAM, PTBA, and TINS remains on SRI-KEHATI in the first listing

published on June 2009 and in the second listing on 29th October 200933,

JATAM and WALHI are the most vocal against the listing. JATAM accused TINS is

responsible for neglecting exhausted open-pit minings without proper reclamation in Bangka-

Belitung province. JATAM also brings up the local conflict between ANTAM and ASM and

other issued faced by PTBA.34 Alongside JATAM, WALHI stated no reason should be accepted

to enlist mining companies in ‘green index’35.

WALHI and JATAM both doubted SRI-KEHATI main objective as ESG campaign

would not be effective as it would be simply used as the companies’ branding instead of

improving the companies commitment on GCG and CSR36.

Regarding this issue, Bimo Budi Satriyo Corporate Secretary of ANTAM answered,

“…By being enlisted on SRI-KEHATI, ANTAM’s commitment towards CSR has recognized externally.

This is shown the negative stigmatization on mining companies as main cause of environmental damage is

inappropriate, at least for ANTAM…”37

32 Egenius Soda, op.cit. 11.33 IDX, Pengumuman : Saham Dalam Penghitungan Indeks SRI-KEHATI No. Peng-00354/BEI.PSH/10-2009, available at http://202.155.2.90/ann_pdf/PENG-00354_BEI-PSH_10-2009.pdf, last accessed on 29th December 2009.34 Egenius Soda, Tambang Masuk Indeks Hijau, Majalah Tambang Volume 3 No. 38 (2009), p. 1435 Ibid, p. 15.36 Ibid, p. 15-16.37 Unofficial translation from interview with Bimo Budi Satriyo Corporate Secretary of ANTAM by electronic mail correspondence in Indonesian language on 22nd January 2010. Contact : bimo.satriyo@antam.com

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4.2. Economically Viable vs. Non-economically Benefits on Being ‘Green’

Findings extracted from interview with the respondents according to questions of

economically viable for the enlisted companies on sustainability index were similar. Abrun

Abubakar Corporate Secretary of TINS stated,

“..There are no significant changes, because stock price fluctuation is more influenced by the company’s

performance…”38

While Bimo Budi Satriyo of ANTAM stated,

“…Until now there is no empiric evidence in relevance between ANTAM enlisted in SRI-KEHATI with

fluctuation of stock price or even the increase of volume trading in the stock exchange…”39

In contrast, there are some fluctuations after the three companies being enlisted on the

index based on statistical analysis provided by IDX in Figure 1.1. The data is taken during the

period of June 2009 to January 2010 on ANTAM’s stock price, PTBA’s stock price, and TINS’s

stock price PTBA achieved the most accelerated increase in the stock exchange, while TINS

reached higher price after a few month. ANTAM remains statics with some downwards

movement in the end of 2009. In contrast with ANTAM 3rd Quarter 2009 Financial Report,

where ANTAM stated its share price increased 19.5% during July-Sept 200940.

Figure 1.1, data extracted from IDX41.

38 Abrun Abubakar, op.cit. 39 Bimo Budi Satriyo, op.cit.

40ANTAM, Antam Report 3rd Quarter 2009, available at http://www.antam.com/images/stories/joget/file/quarterly/2009/9m09qr.pdf, last accessed on 25th January 2010, p.241IDX, IDX STATISTICS 3rd Quarter 2009, also inhttp://www.idx.co.id/LinkClick.aspx?fileticket=A9ShizoEOcI%3d&tabid=185&mid=693&language=en-US, last accessed 17th January 2010. Also see IDX, IDX Monthly Statistic November 2009 Volume 18 No. 11, also in

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Based on IDX data, the companies’ performance in SRI-KEHATI is overall good by looking the

progression of lines as shown in Figure 1.2;

Figure 1.2, IDX 201042.

Both respondents agreed the company has earned other benefits else in economical terms

for being recognized as green company. Bimo Budi Satriyo stated,

“…regarding the corporate image and reputation, the company is getting better respect from investors and

shareholders. When we went for non-deal road show abroad, some potential investors were directly asked us

questions on environmental management and community development. CSR has been an important issue for our

shareholders and investors, even from abroad…”43

http://www.idx.co.id/LinkClick.aspx?fileticket=RKIx10ENpkg%3d&tabid=184 &mid=692&language=en-US, last accessed 17th January 2010. Also see IDX, IDX Monthly Statistic December 2009 Volume 18 No. 12, also in http://www.idx.co.id/LinkClick.aspx?fileticket=UALmJAI6WFk%3d&tabid=184&mid=692&language=en-US, last accessed 17th January 2010.42 Ibid.43 Bimo Budi Satriyo, Ibid.

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His statements are relevant to ANTAM Financial Report which stated 45% of ANTAM’s

top shareholders are foreign investors44. Abrun Abubakar viewed the issue further based on his

statement,

“…Some investors in the stock exchange with high environmental concerns are more attracted to

companies enlisted in SRI-KEHATI...Companies’ performance is influenced by environmental management and

community development. Therefore, if the company is excellent in managing the community development and the

environment issue, it will reduce the investment risk into minimum. The investment become safer and sustainable

for long-term…”45

In the issue of the cost for ESG factors could overcome the company’s long-term profits;

both respondents were stating it would not but with different arguments. Abrun Abubakar stated,

“..No, it is not. It is not a problem for us after all as it has been stipulated in Article 76 of Mining Code that

every company is obliged to perform CSR…”46

Based on TINS’s Sustainability Report 200847 the company allocated Rp 5.9 billion in

2008 for CSR, as shown in Figure 1.3. A reduction from 2007’s allocation but still higher than

other previous years.

Figure 1.3, TINS 2008 – Realization of Partnership Programme Fund 2003-2008

44 ANTAM, op.cit. p.345 Abrun Abubakar, op.cit.46 Ibid.47 PT Timah Tbk, Laporan Berkelanjutan 2008, also in http://www.timah.com/images/stories/files/sr_timah08-indo.pdf, last accessed on 29th December 2009.

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Based on ANTAM Sustainability Report 2008, the company spent nearly 5 % from the

2007 company’s net profit to provide funds for their CSR programme48. It was approximately Rp

244.3 billion. Bimo Budi Satriyo gave more comprehensive explanation regarding the issue, as

follows;

“We felt the cost we spent to support CSR, environmental management, and community developments are

still much lower compared with long-term profits gained by the company. ANTAM understands environmental

management and community development are part of the business risk that needs to be carefully managed. Took

active participation community development as good corporate citizen would reduce any disturbances to the

company’s operation. Risks of failures on environmental management could make the company suffers great loss

while we have to spend high cost on its mitigation. That is why we are not focusing merely on profit gains, but also

the business sustainability and development…”49

5. CONCLUSION

The emphasize of SRI is lying on the optimization of using the ESG material for

investment analysis and decision-making process in a particular form of investment that would

lead to sustainability development, not just as for responding on social concerns at present. In

SRI, investors could be assured the investment would be managed under disciplined

management with less resistance from stakeholders in the community regarding the by-products

of the investment itself. Such as, environmental damages, local conflicts, and other social

concerns.

Sustainability Index is then created to provide reliable and investable benchmark for SRI.

Whereas there is neither rigid standard of making the index ever structured, most Sustainable

Index is designed to be independent and providing rational, investable benchmark a basis for

funds and derivatives that being focused on sustainability companies.

The research conclude that for mining companies being recognized as ‘green’ companies

is economically viable based on the progression of the stock price. However, both companies

that being observed disagree the analyse as they felt the new condition is not significant enough

48 ANTAM, ANTAM Sustainability Report 2008, available at http://www.antam.com/images/stories/joget/file/annual/2008/FINAL_SRANTM08.pdf, last accessed on 20th

January 2010.49 Bimo Budi Satriyo, op.cit.

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be claimed has boosted their profitability along the listing period. Other factors have to be

observed to examine the company profitability after being enlisted in a sustainability index.

However, both companies agree they have gained other benefits exclude direct profits for

being a progressive company in CSR and CD respectively. More investors get attracted to invest,

the shareholder’s interest become maintained in better and sustainable manner, cost-efficiency

for mitigation, and business life-span could be prolong without disturbance from local

community and environmental factors.

Profitability could be gained as expected as long the operation is working according to

business plan with minimum risk during the process. In this case, the economically viable of

being a ‘green company’ is by expanding the company target into more sustainable development

in bigger scope. Rather than short-term profit gain and secluded the development only within the

company’s body itself. Therefore, being a company that reach SRI’s standard is actually provide

long-term profit and benefit for the business.

Lastly, the research has found CSR programme budget for both companies that being

observed are vary annually. Companies use review and budget estimation to reach the CSR, CD

and environmental management targets without over-spending. Though the budget is taken from

the company’s last net profit instead came from long-term saving, conclusion of the relation

between CSR cost and long-term profit could be taken from these data. As every year the

company save around 5% or less for funding the CSR programme, it means in long-term the

company has sure it would not absorbed most on their profit. Therefore providing cost for CSR,

CD and environmental management is not a burden for mining company expenditure.

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BIBLIOGRAPHY

PRIMARY RESOURCES

Rule Number I-A : Concerning The Listing of Shares (Stock) and Equity-Type Securities Other

Than Stock Issued By The Listed Companies, Decision of the Board of Directors of the Jakarta

Stock Exchange Inc. Number : Kep-305/BEJ/ 07-2004 19th

July 2004 (entered into force 19th

July

2004)

SECONDARY RESOURCES

BOOK

Joel Makower and Cara Pike, Strategies for Green Economy : Opportunites and Challenges In The New World of Business, (United States of America : McGraw-Hill, 2009)

Kinder, Peter et.al., Investing For Good: Making Money While Being Socially Responsible(United States, New York : HarperCollins Publisher, 1993)

Salim, H.S., Hukum Pertambangan di Indonesia, Page 118, Indonesia , Jakarta : Rajawali Pers, 2008.

ARTICLES

Azis, Iwan J. and Salim,Emil , Development Performance And Future Scenarios in The Context of Sustainable Utilisation of Natural Resources, The Politics and Economics of Indonesia’s Natural Resources (B. Resosudarmo, ed., Singapore : ISEAS, 2005)

Soda, Egenius, SRI-KEHATI: The Indonesian Stock Exchange’s “Green Index”, Majalah Tambang Volume 3 No. 38 (2009), p. 66 – 67.

Soda, Egenius, Melambungnya SRI Indeks, Majalah Tambang Volume 3 No. 38 (2009) p. 18-19

Soda, Egenius, SRI-KEHATI Hijaukan Bursa, Majalah Tambang Volume 3 No. 38 (2009), p. 11.

Soda, Egenius , Tambang Masuk Indeks Hijau, Majalah Tambang Volume 3 No. 38 (2009), p. 14

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OTHER RESOURCES

REPORTS

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Review and Inventory of the Social Investment Industry’s Activities and Potential in Emerging

Markets, available at

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on December 27th, 2009.

INTERVIEW

Unofficial translation from interview with Abrun Abubakar, Corporate Secretary of PT Timah, Tbk. Interview is exercised on live conversation by using Skype, January 22nd, 2010 to his personal mobile number. Contact : investorrelation@pttimah.co.uk

Unofficial translation from interview with Bimo Budi Satriyo Corporate Secretary of ANTAM by electronic mail correspondence in Indonesian language on 22nd January 2010. Contact : bimo.satriyo@antam.com

ForAcademic Purpose

OnlyNO-PLAGIARISM!

19

INTERNET RESOURCES

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December 2009.

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December 2009

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IDX, Pengumuman : Saham Dalam Penghitungan Indeks SRI-KEHATI No. Peng-00354/BEI.PSH/10-2009, available at http://202.155.2.90/ann_pdf/PENG-00354_BEI-PSH_10-2009.pdf

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ForAcademic Purpose

OnlyNO-PLAGIARISM!

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JSE, Live Pricing on JSE SRI Index, available at http://www.jse.co.za/Libraries/SRI_Press_ Releases/Living_Pricing_on_SRI_index_-_9_September_2009.sflb.ashx, last accessed 12th

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ForAcademic Purpose

OnlyNO-PLAGIARISM!