Banks are key to sustainable development, influencing corporate behavior by allocating capital towards sustainable initiatives. Because of this, they can drive the transition to a more sustainable future through financing, technical assistance and risk management. This study aims to identify the key drivers of sustainability performance in Indonesian banks by analyzing their sustainability reports.
Grounded in stakeholder theory, we conducted a qualitative content analysis of the sustainability reports of two Indonesian banks (PT Bank CIMB Niaga Tbk [BNGA] and PT Bank Mandiri (Persero) [BMRI] from 2022 to 2023. The authors examined the alignment between materiality, strategy and stakeholder engagement, the presence of external assurance and the implementation of Green Taxonomy. The authors also analyzed the relationship between reported sustainability performance, firm valuation and environmental, social, and governance (ESG) risk ratings.
The four key drivers that influence the sustainability performance of banks are the alignment of materiality, strategy and stakeholder engagement; implementation of Green Taxonomy; strong sustainability governance; and effective risk management. By incorporating environmental and social performance alongside governance and economic performance, these banks have demonstrated a comprehensive approach to sustainability that can positively impact their firm valuation and ESG risk ratings. This analysis showed that BNGA prioritizes customer data security, privacy and governance. BMRI highlights its own unique strengths in sustainability reporting with different priorities and commitments.
This study contributes to the literature by providing insights into the specific drivers of bank sustainability performance in Indonesian. It offers practical recommendations for banks seeking to improve their sustainability practices and contribute to positive social and environmental impacts.
