JURIDICAL ANALYSIS OF ESG (ENVIRONMENTAL, SOCIAL, AND GOVERNANCE) REGULATORY POLICIES IN INDONESIA'S BUSINESS AND INVESTMENT: EMPIRICAL STUDY ON GOVERNMENT SUPPORT AND FACILITY FOR FINANCING THE INFRASTRUCTURE OF NUSANTARA
Lufta Erwin Winata, I.G.A.M Wardana, S.H., LL.M, Ph.D.
2025 | Tesis | S2 ILMU HUKUM JAKARTA
While Indonesia has reaffirmed its commitment to the Sustainable Development Goals which has manifested into numerous of policies, Government sees considerable potential in promoting more effective use of the state budget to achieve SDGs, notably by incorporating environmental, social, and governance (ESG) factors in infrastructure financing. Nonetheless, there appears to be a paucity of juridical analysis in terms of an empirical normative legal approach to ESG regulatory laws on business and investment activities, let alone project finance.
Thereby, this research will explore what ESG is in a legal context by questioning the legal nature of ESG and elaborate legal analysis of ESG-based financing, focusing on government support and facility for financing IKN infrastructure project. This study adopts qualitative methodologies to assess the data collected from literature reviews, regulatory studies, comparative studies, interviews, and observations by employing the empirical normative legal approach.
The ESG Framework and Manual that have been released only serve as guidelines and possess no legal force, it is reasonable to infer that there aren’t any legally binding ESG regulations presently that must be enforced. In silos or disintegration, ESG implementation is fundamentally mandatory, but limited only by laws and regulations on each factor of the environment, social, and governance separately. To be compatible and aligned with the legal positivism of ESG-based financing, the existence of clear and unified legal provisions is critical to assure legal certainty of ESG-related laws and policies yet comes with some critical considerations. If the unification is considered will raise transaction costs, those expenses should be weighed when deciding whether to integrate the ESG legal framework along with how the law itself should effectively lower transaction costs.
While Indonesia has reaffirmed its commitment to the Sustainable Development Goals which has manifested into numerous of policies, Government sees considerable potential in promoting more effective use of the state budget to achieve SDGs, notably by incorporating environmental, social, and governance (ESG) factors in infrastructure financing. Nonetheless, there appears to be a paucity of juridical analysis in terms of an empirical normative legal approach to ESG regulatory laws on business and investment activities, let alone project finance.
Thereby, this research will explore what ESG is in a legal context by questioning the legal nature of ESG and elaborate legal analysis of ESG-based financing, focusing on government support and facility for financing IKN infrastructure project. This study adopts qualitative methodologies to assess the data collected from literature reviews, regulatory studies, comparative studies, interviews, and observations by employing the empirical normative legal approach.
The ESG Framework and Manual that have been released only serve as guidelines and possess no legal force, it is reasonable to infer that there aren’t any legally binding ESG regulations presently that must be enforced. In silos or disintegration, ESG implementation is fundamentally mandatory, but limited only by laws and regulations on each factor of the environment, social, and governance separately. To be compatible and aligned with the legal positivism of ESG-based financing, the existence of clear and unified legal provisions is critical to assure legal certainty of ESG-related laws and policies yet comes with some critical considerations. If the unification is considered will raise transaction costs, those expenses should be weighed when deciding whether to integrate the ESG legal framework along with how the law itself should effectively lower transaction costs.
Kata Kunci : ESG, ESG Laws, Project Finance, Government Support, Infrastructure
