Promoting Ethical and Sustainable Pension Fund Management in Indonesia: The Triangle Syariah Justice Ecosystem Approach

May 23, 2023

Contributor: Fatima Zahra | Editor: Dadi Darmadi

The outbreak of the Covid-19 pandemic in 2020 sent shockwaves through the global economy, affecting numerous sectors and industries along the way. In Indonesia, a country where the pension system plays a crucial role in ensuring retirees' financial security, several challenges have emerged. Issues such as participants' limited knowledge of investment returns, the absence of Syariah Pension Funds in the Indonesian Pension Fund Act, and strict laws governing investment portfolios have made profitability, affordability, and sustainability ongoing struggles for pension funds in the country.

However, a new approach proposed by Fahmi Alamil Huda and Andiyani Kurnia offers hope for the transformation of Indonesia's pension fund sector. Their paper titled "Triangle Syariah Justice Ecosystem: Constructing Business Model of Pension Fund" suggests a groundbreaking solution that combines the principles of green investment with Syariah values, striking a balance between profit, affordability, and sustainability.

The authors propose a new business model specifically tailored for Indonesian pension funds. They introduce the Triangle Syariah Justice Ecosystem, a digitalized management system inspired by Malaysia's pension system and modified from the INTERDAP program used by PT. Angkasa Pura II.

The overarching mission of the Triangle Syariah Justice Ecosystem is to establish a harmonious relationship between prosperous business practices, environmental protection, and the adherence to Islamic values. This innovative approach not only aims to generate profits for pension funds but also emphasizes the positive impact they can have on the environment while meeting the demands of Indonesia's predominantly Muslim population.

The business model encourages pension funds to explore sustainable and Syariah-compliant investment options, which are gaining popularity both globally and in Indonesia. By allocating a portion of funds to halal investments, such as the Islamic stock and bond markets, as well as environmentally friendly projects, the Triangle Syariah Justice Ecosystem ensures that pension funds align with Islamic beliefs and contribute to the country's sustainability objectives.

What sets the Triangle Syariah Justice Ecosystem apart is its commitment to both environmentally responsible investing and Syariah law. This cutting-edge method of managing pension funds not only supports the growth of financial sector businesses but also addresses the ethical and sustainable goals of the Indonesian market and Islamic financial institutions.

With its incorporation of green investment objectives and Syariah principles, this digitalized management system caters to the demands and beliefs of Indonesia's predominantly Muslim population. Beyond its immediate impact, the proposed business model has the potential to fundamentally transform the current state of pension funds in the country. Moreover, the insights gained from this research may prove invaluable in helping other nations improve their pension systems and expand retirement opportunities for their citizens.

As Indonesia seeks to promote ethical and sustainable practices within its pension fund management, the Triangle Syariah Justice Ecosystem offers a promising solution. By merging the principles of green investment and Syariah values, this innovative approach paves the way for a more prosperous and environmentally conscious future for pension funds in the country, while also catering to the needs and beliefs of its citizens.