Irfan Syauqi Beik
FEM IPB Syariah Economist and a BWI Member
EKISPEDIA.COM - The earthquake in Cianjur, which according to BNPB records, resulted in 268 deaths as of Tuesday 22 November 2022, added to the nation's series of sorrow over the various natural disasters that have occurred in this country. As is known, Indonesia is a country that is very vulnerable to various natural disasters.
Based on BNPB data, throughout 2021 there have been 5,402 disaster events and 99.5 percent of them were hydrometeorological disasters, caused by climate change and weather. BNPB data also shows that of these disaster events, floods were recorded as the most frequent, namely 1,794 incidents, followed by 1,577 disaster events due to extreme weather, 1,321 landslides, 579 forest and land fire incidents, 91 tidal wave and abrasion disasters, 24 earthquakes, 15 droughts and 1 volcanic eruption.
As for the number of victims as a result of the disaster, BNPB noted that the number of victims who died due to disasters in 2021 reached 728 people, 87 people were missing, 14,915 people were injured, 7.6 million people were displaced, 158 thousand houses were damaged, 4,445 facilities public buildings were damaged, 664 offices were damaged, and 505 bridges were damaged. Of course this situation also has an economic impact.
In addition to the material losses suffered, it can also add to the number of new poor people, especially for those who have economic limitations. For this reason, the condition needs to get all of our attention, especially when looking at the fact that the contribution of economic and business activities that do not pay attention to environmental aspects is one of the main causes of this hydrometeorological disaster.
One solution is to continue to develop the ESG (Environment, Social, Governance) concept and its application in Indonesia. This concept is based on the importance of maintaining environmental, social and governance aspects in developing economic activities. This ESG must be a major consideration in developing economic activities, including business and investment.
Basically, the ESG concept is very much in line with Islamic economic principles. The basic philosophy of Islamic economics which emphasizes the achievement of maslahah conditions, where economic activities must provide sustainable benefits and blessings within the framework of justice, is very much in line with the ESG concept.
From an environmental point of view, Islamic economics pays very deep attention to efforts to protect and preserve the environment. In many verses, Allah SWT has reminded us of the importance of protecting the environment and the damage it causes. What's interesting, in QS 30: 41, Allah expressly states that the damage that occurs on land and sea is the result of human hands. Human activities that are consciously and deliberately, through systematic and well-managed business planning, have resulted in structural damage to nature due to neglect of environmental impacts. Therefore, corrections to economic, financial and business systems, through the use of various green terminologies, such as green economy and green finance, need to be continuously encouraged and developed.
Then from the social side, Islamic economics also has a very strong concern. Islam teaches that every commercial business entity is obliged to carry out its social function. The implementation of this social function is shown, among other things, by fulfilling zakat obligations, both zakat at the individual and business entity levels, and other social services including infaq, alms and endowments. ZISWAF is the most fundamental indicator from the social side, in addition to managing relationships with strategic stakeholders in the developed economic and business ecosystem. Islamic banks, for example, even though they are business entities, are required to carry out social functions. Therefore, it is rather strange that there are Islamic financial institutions, which are reluctant to fulfill their ZISWAF.
As for governance, Islamic economics also teaches the importance of ensuring that economic and business governance that is developed can be implemented properly and sustainably. This aspect of sustainability is also very important because it also greatly influences the future of the economy. Implementation of governance based on itqan and ihsan principles will give birth to optimal economic and business performance. Thus, conceptually, this ESG is actually something that should be attached automatically to economic and business entities, both in the real sector and the financial sector, including in the management of amil and nazhir institutions in the social sector.
Sharia ESG Application
Although still limited, efforts to implement the sharia ESG concept have been carried out in various sectors and industries in the sharia economy. On the financial side, the government has developed various investment products that are relevant to ESG applications which are reflected among others in the issuance of green sovereign sukuk, both on a global and retail scale. This is done, among other things, as an effort to finance climate action activities, which by 2030 will require funds of no less than IDR 3,461 trillion (Ministry of Finance, 2021).
The initial issuance of global green sukuk by the government was carried out in March 2018 with a total issuance value of USD 1.25 billion. By the end of 2020, nearly three billion US dollars worth of global green sukuk had been issued. While on the retail side, in the same period until the end of 2020, green retail sukuk have been issued through the issuance of the ST-006 series savings sukuk with a value of IDR 1.46 trillion, followed by ST-007 worth IDR 5.4 trillion.
On the social finance side, green waqf programs have also developed in various areas, such as the waqf forest in Bogor. BWI together with UNDP Indonesia have also published the Green Waqf Framework concept as a systematic effort to optimize waqf-based green development. Going forward, public education on the sharia ESG concept as well as existing product innovations must continue to be developed. One of them, IDX's plan to initiate an ESG-based Sharia Securities List (DES-ESG) we need to welcome and hopefully be realized in 2023. It's time for us to implement the ESG concept to improve the quality of sharia business in the country. Wallaahu a'lam.
Disclaimer: This article was published on Iqtishodia Republika, Thursday 24 November 2022