Flooring Guide by Cinvex – , JAKARTA — Environmentally friendly stocks listed on the Indonesian Stock Exchange (BEI), also known as Environmental, Social, and Governance (ESG)-based stocks, have demonstrated a significant rally over the past month. These ESG-centric equities are increasingly viewed as more appealing investments, largely attributed to their strong corporate governance and inherently lower risk profiles.
According to data from the BEI, the IDX ESG Leaders (IDXESGL) index, comprising 30 prominent issuers, saw a modest gain of 0.07% to close at 151.25 on Friday, August 22, 2025. This recent performance follows an impressive trajectory, with the IDXESGL surging by 8.49% over the last month and maintaining a positive growth of 2.87% year-to-date (YTD).
The robust performance of the IDXESGL throughout 2025 has been underpinned by several constituent stocks acting as top leaders. For instance, shares of PT Elang Mahkota Teknologi Tbk. (EMTK) have recorded an extraordinary price increase of 147.46% YTD. Similarly, PT Telkom Indonesia Tbk. (TLKM) has strengthened by 29.77% YTD, while PT Pertamina Geothermal Energy Tbk. (PGEO) climbed by 59.93% YTD.
Adding to the index’s upward momentum, two major banking players within the IDXESGL, PT Bank Rakyat Indonesia Tbk. (BBRI) and PT Bank Negara Indonesia Tbk. (BBNI), have also remained in positive territory, rising by 6.84% and 11.96% respectively throughout 2025.
The IDXESGL itself is an index meticulously designed to measure the price performance of stocks that demonstrate excellent ESG assessments. Companies whose shares are included in this prestigious index are carefully selected for not being involved in significant controversies and for exhibiting strong transaction liquidity and sound financial performance.
Looking ahead, Senior Equity Analyst at Kiwoom Sekuritas Indonesia, Sukarno Alatas, maintains a positive outlook for the IDXESGL. He believes its prospects are buoyed by prevailing global trends and growing investor interest in sustainable practices. Furthermore, many stocks within this ESG-focused index also belong to highly liquid indices such as LQ45 and IDX30, enhancing their attractiveness.
“The market opportunity is also supported by the asset under management (AUM) for ESG products, which has already surpassed IDR 8.21 trillion, backed by regulations from the Financial Services Authority (OJK). Meanwhile, millennial and Gen Z investors are increasingly drawn to sustainable investment instruments,” Sukarno informed Bisnis on Friday, August 22, 2025.
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Despite their strong underlying fundamentals, ESG index constituents are perceived as more attractive due to their reflection of good governance and lower risk. However, it’s important to note that their price movements ultimately remain dependent on these fundamentals.
On the flip side, the IDXESGL faces several challenges that could temper its growth. These include relatively low awareness among retail investors, a limited array of ESG fund products available in the market, and disparities in ESG assessment methodologies, which result in non-uniform rating standards across the industry.
ESG Stocks with Attractive Valuations
Amidst the strong performance and positive outlook for the IDXESGL, several constituent stocks still present promising opportunities with attractive, or “undervalued,” valuations. This assessment is based on commonly used metrics such as the price-to-earnings ratio (PER) and price-to-book value (PBV).
Typically, a PER below 10 times and a PBV below one time are often used as simple benchmarks to identify stocks that may be considered cheap or discounted. Among the undervalued ESG stocks within the IDXESGL, Sukarno highlighted PT Jasa Marga Tbk. (JSMR), PT Erajaya Swasembada Tbk. (ERAA), PT Pakuwon Jati Tbk. (PWON), PT Ciputra Development Tbk. (CTRA), and PT Bank CIMB Niaga Tbk. (BNGA).
Referencing Bloomberg data, JSMR recorded a PBV of 0.71 times and a PER of 6.08 times, with its closing price at IDR 3,310 today. ERAA showed a PBV of 0.85 times and a PER of 6.65 times, closing at IDR 452. PWON’s PBV stood at 0.89 times and its PER at 7.86 times, with a closing price of IDR 382.
Furthermore, CTRA reported a PBV of 0.84 times and a PER of 8.12 times, closing at IDR 1,010. Lastly, BNGA registered a PBV of 0.81 times and a PER of 6.31 times, with its shares ending the day at IDR 1,725.
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Indonesian Capital Market Activist Reydi Octa also emphasized the growth potential of ESG-based indices, driven by the global trend towards sustainable investment. He believes the long-term appeal of the ESG index makes it particularly suitable for institutional investors or those who prioritize a positive corporate reputation and long-term risk mitigation strategies.
According to Reydi, promising ESG-based stocks can be found in the banking sector, which currently benefits from a trend of declining benchmark interest rates. The property sector is also poised to gain from lower interest rates. Consequently, stocks such as PT Bumi Serpong Damai Tbk. (BSDE) and CTRA warrant close attention from investors.
Earlier, Ignatius Denny Wicaksono, Head of Business Development Division 2 at BEI, underscored that ESG-based indices inherently possess the potential for higher returns compared to conventional investments. He pointed out that five ESG-based indices are currently listed on the Exchange: IDXESGL, IDX LQ45 Low Carbon Leader (IDXLQ45LCL), SRI-KEHATI Index, ESG Sector Leaders IDX KEHATI (ESGSKEHATI), and ESG Quality 45 IDX KEHATI (ESGQKEHATI).
“Interestingly, all five of these indices consistently deliver higher returns than other non-ESG indices, such as LQ45 and IDX30,” Denny stated during a recent discussion forum. He concluded that investors who integrate ESG considerations into their investment decisions not only contribute to environmental preservation but also achieve significant financial benefits.
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Disclaimer: This news article is not intended as an invitation to buy or sell shares. Investment decisions rest solely with the reader. Bisnis.com is not responsible for any losses or gains arising from the reader’s investment decisions.
Summary
ESG-based stocks on the Indonesian Stock Exchange have shown strong performance, with the IDX ESG Leaders (IDXESGL) index surging 8.49% over the past month and 2.87% year-to-date in 2025. This appeal is driven by their strong corporate governance, lower risk profiles, global sustainability trends, and inclusion in highly liquid indices. Top performers like EMTK, TLKM, and PGEO have significantly contributed to the index’s positive trajectory, attracting growing investor interest.
Despite a positive outlook supported by increasing ESG product assets and regulatory backing, challenges include low retail investor awareness and inconsistent assessment methodologies. Nevertheless, analysts identify several IDXESGL constituent stocks, such as JSMR, ERAA, and BNGA, as undervalued based on PER and PBV metrics, presenting promising opportunities. Overall, ESG-based indices consistently offer higher returns than non-ESG benchmarks and are suitable for long-term investment strategies.