Sustainable Value Chain for Sustainable Lending of State-Owned Banks in Indonesia

Abstract

Banks have enormous potential to support the achievement of sustainable development goals (SDGs) in accordance with their function as financial intermediaries through sustainable lending. However, the average national financing growth for the sustainable business activity category over the past four years is still 12%. The aim of this research is to identify the conditions of sustainable lending at state-owned conventional banks and analyze the influence of the value chain, economic performance, and ESG performance on sustainable lending. The research was conducted at state-owned commercial banks in Indonesia. The research utilized structural equation modeling (SEM). The SEM results of this study describe value chain, ESG performance (environmental, social, and governance), and economic performance and have direct and positive influences on sustainable lending, of which ESG performance has the biggest influence. As per each individual aspect, social orientation makes the biggest contribution toward sustainable lending.