Introduction and Trends in Sustainable Investment

The Indonesian Investment Advisors Association (APII) was established in Jakarta on 29 October 2018 based on Deed No. 92 by Notary Leolin Jayayanti, SH., M.Kn., as a forum for Investment Advisors licensed by the Financial Services Authority (OJK). APII plays a role in assisting OJK in improving capital market performance, particularly in terms of investor numbers, while facilitating investors with valid, independent, and professional information. In addition, APII actively promotes financial literacy and inclusion through various educational activities such as workshops and investment classes in cooperation with capital market players and across industries, and serves as OJK’s partner in upholding standards of conduct and code of ethics for its members.

In the 7th century, through Islamic teachings, a strict rule emerged that money must not be invested in practices that have complete uncertainty such as gambling and other prohibited activities, including industries that damage morals. This principle developed into sharia-based investment and this was an early form of responsible investment screening. Continuing into the 17th century, a prohibition emerged from the Quaker community and its members in the United States that forbade investing money in the slavery industry and the arms trade. Interestingly, this principle was firmly held by major financial institutions such as Barclays and Lloyds which still stand firm today. Furthermore, in the 18th century, John Wesley as the founder of the Methodist movement pioneered the sermon “The Use of Money”, which emphasised the principle “Earn as much money as you can without hurting your neighbour”. This movement criticised investment in “sinful” companies and avoided shares in the alcohol, tobacco, and weapons industries. History continued into the 20th century, where starting from merely boycotting “sinful” shares, war issues, to environmental crises, history has proven that investment strategy has now matured and continues to develop until global standards based on Environment, Social, and Governance (ESG) emerged. Until now in the modern era, this investment is known as socially responsible investment and later as a concrete form of action applied by investors as sustainable investment. In general definition, sustainable investment is the practice of investing capital in investment instruments that are proven to apply the principles of environmental sustainability, social responsibility, and good governance or known as ESG.

In further understanding, there is terminology also known as sustainable finance. Sustainable finance is an ecosystem with comprehensive support in the form of policies, regulations, norms, standards, products, transactions, and financial services that align economic, environmental, and social interests in financing sustainable activities and financing the transition towards sustainable economic growth. This is generally inseparable from sustainable investment and interrelated, with sustainable investment placing more emphasis as an action option owned by investors to choose ESG-based financial products. Discussing further regarding ESG, ESG is the main compass in reviewing whether a company carries out activities called “sustainable”. ESG consists of three complementary pillars.

Climate change is a new challenge for all humanity. This crisis is not only the responsibility of the government or one country alone, but involves global collaboration from various elements ranging from individuals, institutions, to industrial sectors throughout the world. From the environmental side, based on the Global Energy Review 2026, carbon dioxide (CO2) emissions again broke records in 2025 reaching around 38.4 gigatonnes. However, viewed from the annual increase, it was recorded as rising more slowly to +0.4% or around 145 million tonnes from the previous year, and 5% above the 2019 level. This data confirms how urgent CO2 emission management is. High CO2 emissions, triggered by activities that have not implemented environmentally friendly principles, have a direct impact on global warming and extreme climate change. Through sustainable investment, investors not only pursue returns to achieve financial goals, but also play an active role in minimising the adverse impacts of operational practices that are not environmentally friendly.

In the global market, the trend of sustainable investment continues to increase. Based on the Global Sustainable Investment Review 2024, which uses data on total assets under management of mutual funds in the global market analysed at USD 61.7 trillion in Europe, the United States, Canada, Japan, as well as Australia and New Zealand, around 27% or USD 16.7 trillion in 2024 was recorded as sustainable investment continuing to grow. This nominal is calculated using the application of the Responsible & Sustainable Investing (R&SI) approach. This R&SI approach is a harmonisation of definitions adopted in order to obtain financial returns and/or achieve sustainable outcomes. In Indonesia itself, the sustainable investment ecosystem operates through several instruments and practices commonly known such as green sukuk. Indonesia is the first country to issue green sukuk in 2018. Citing a statement by former Minister of Finance, Sri Mulyani Indrawati, reporting that total Green Sukuk issuance covering Global Green Sukuk, Retail Green Sukuk, and Project Based Sukuk has cumulatively reached Rp185.6 trillion by 2025, with details of global sukuk issuance of USD 6.6 billion.