Several indexes are used to benchmark stocks and equity funds on the Indonesia Stock Exchange (IDX). An index is a tool for tracking the performance of a group of stocks, bonds, or other securities. There are several significant sub-indexes of the Jakarta Composite Index (JCI), such as the LQ45, which measures the movement of the top 45 most liquid stocks and the IDX 30, which monitors the top 30 most liquid stocks with the largest market capitalization. Another one of these indexes is the SRI-KEHATI index, a Sustainable Responsible Investing index in partnership with Yayasan Keanekaragaman Hayati Indonesia (KEHATI) and the Indonesia Stock Exchange. This index was launched on June 8th, 2009 and has become one of the main benchmarks used by fund managers, investors, and others in the capital market to measure the performance of stocks listed on the IDX.

The SRI-KEHATI index is composed of 25 constituents that are selected and vetted by the Indonesia Stock Exchange and KEHATI. The re-evaluation of existing constituents and onboarding of new constituents happens twice a year, in April and October. One of the purposes of this index is to motivate listed companies to focus on financial performance and social and environmental responsibility. The SRI-KEHATI index is a green investing index certified by exchange and sustainable investment data as the first green index implemented by an ASEAN member country and the second implemented in Asia. The SRI-KEHATI index is also part of Socially Responsible Investing or ethical investing, which means this index is focused not only on financial aspects but also social and ethical issues.

Therefore the vetting process for listed companies to become constituents considers the above values. This process consists of three aspects. The first is core business, in which the evaluating committee must ensure that the potential constituent does not engage in harmful industries or practices. Such as the manufacture of nuclear weaponry, genetically modified organisms, pornography, production and distribution of alcohol and tobacco, gambling, coal mining, et cetera. The second requirement is financial health, in which the potential constituent must possess a market capitalization of above 1 trillion rupiahs (1T). Also, the free float ratio, the amount of publicly traded, must be above 10%, and the price-to-earnings ratio must be positive. The third consideration concerns the fundamentals of the potential constituent, which are evaluated based on six criteria: 1) governance, 2) environment, 3) societal participation, 4) business practices, 5) human rights, and 6) human resources.

Over the past year, the SRI-KEHATI index has yielded excellent performance, with current year-to-date performance of 14.3% (07/12/22). As a comparison, the SRI-KEHATI index outperformed the JCI (3.61% YTD) by more than 10.69% this year. Socially responsible and ethical investing is a continuously growing trend, as is clearly illustrated by the SRI-KEHATI index’s stellar performance this year.

Two index funds available on the Moduit platform that focus on the SRI-Kehati index are BNP Paribas Sri Kehati and Allianz Sri Kehati Index Fund, with year-to-date performances of 15,67% and 15,59%, respectively (per 07/12/22). For investors who have socially responsible and ethical investing needs, these funds may provide a good solution.

As a reference, these are the top 10 stocks in the SRI-Kehati index as of December 7th, 2022.

BBRI 15,6% BMRI 15,1% BBCA 14,7% TLKM 14,7% ASII 9,6% BBNI 6,6% UNTR 3,6% KLBF 3,4% INDF 2,5% UNVR 2,2%