In a reflection of global trends, investors in Indonesia are looking more and more at companies’ ESG performance to help inform their deal decisions. Although adherence to emerging government regulations is clearly mandatory, initiatives are also coming forward from the private sector to help companies figure out and report on their ESG and impact.
For example, AC Ventures (ACV) recently published Indonesia’s first quantifiable ESG standards with its debut report, “Scaling Impact with Technology,” produced in partnership with Boston Consulting Group (BCG) and supported by The Upright Project.
The Upright Project provides a high-powered, AI-enabled platform that helps companies measure their effects on the environment and society around them, explained Toni Laitila, VP of Investor Business for the Helsinki, Finland-based company during a recent podcast with Lauren Blasco, head of ESG at ACV.
Upright’s platform gives companies a metric known as their ‘net impact ratio’ that lets them transparently report to investors and the general public about how well they are performing with ESG, as well as on the areas in which they can improve.
Upright scores companies by using an AI engine that maps the ESG impact of some 15,000 products and services based on millions of reports in scientific literature. Scores above zero demonstrate a positive impact, whereas scores below zero show a negative impact, said Toni.
“How we’ve approached this is to identify the stakeholders of companies which include their investors, employees, and customers, and to provide better data about the impacts on these different stakeholders,” he explained.
Upright’s net impact ratio determines how companies are faring on four key dimensions of ESG – environment, health, society, and knowledge – across 19 sub-categories.
Upright’s focus on companies
Based on the net impact ratio, many Indonesian startups seem to be doing well. In its report, ACV measured its own net impact ratio along with the impacts of its portfolio companies. Together, ACV and its portfolio turned in an above-average score of plus 37%, in comparison to plus 29% average score for the Nasdaq Small Cap Index.
The United Nations (UN) also produces its own extensive sustainability framework. “The UN’s framework is great, but it’s designed to be a list of priorities for humankind, about how countries can contribute to the solution of problems. So it’s starting from the nations. It’s not designed to measure the impact of companies,” Toni noted.
Meanwhile, nations have been establishing their own ESG regulations, and a patchwork of mandates is emerging for reporting and compliance with country-specific laws, and more regulations to come.
Nations do need to set their own priorities and regulations around ESG, explained Toni. “But what we’re trying to build is a global standard for measuring the ESG and impact of businesses.”
In his view, some earlier, private initiatives around measuring impact have been too concerned with “nitty-gritty details” about matters like conduct codes and business processes to be able to offer an accurate assessment of a company’s overall ESG impact.
He said, “We are looking at the products and services companies are producing and selling rather than focusing on the governance and compliance side or on fielding questionnaires. With our approach, it’s about the core business. What is the problem that your startup or company is trying to solve, and how does this affect the world around us? What is your future outlook?”
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See also: What Upright means for tech investors in Asia Pacific
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