Evaluation of Environmental and Social Safeguards Performance Assessment Method using Corrective Action Plan Compliance Rate in Financing and Investment

This study evaluates the environmental and social safeguards (ESS) performance assessment method of PT Sarana Multi Infrastruktur (Persero) (PT SMI), focusing on the corrective action plan (CAP) compliance rate in financing and investment. Despite the utility of the compliance rate in monitoring adherence to financing agreements, it often inaccurately reflect actual environmental and social performance due to its inherent ambiguities. This research employed a qualitative method, employing observations of 146 active financing facilities and equity investment, surveys, and discussions with PT SMI’s ESS personnel. The study reveals that projects with higher CAP compliance rates may still have unresolved issues, while projects with fewer CAPs can be unfairly categorized as underperforming. To address these limitations, the study proposes a new, comprehensive framework that incorporates multiple variables to better capture ESS performance. This approach aligns with sustainable practices, enhances legitimacy, and meets stakeholder expectations more effectively. In addition, the proposed framework offers opportunities for incentives or disincentives based on ESS performance. Future research should focus on developing and validating this new framework to ensure accurate assessments of ESS performance in financing and investment activities.