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Sustainable Investment Divestment Policy

Considering

  1. The Decree of the Rector of Universitas Muhammadiyah Kalimantan Timur (UMKT) regarding the Commitment to Achieving Sustainable Development Goals.
  2. That UMKT is committed to applying the values of Al-Islam and Kemuhammadiyahan in all aspects of financial governance.
  3. That as a form of tangible contribution to the Sustainable Development Goals (SDGs) and environmental protection in East Kalimantan, ethical guidelines in investment management are required.
  4. That it is necessary to establish an official policy regarding the withdrawal of capital (divestment) from sectors that conflict with sharia principles and sustainability.

General Provisions

  1. Investment Divestment: The strategic action of withdrawing capital, releasing financial assets, or terminating investment cooperation from an entity or financial instrument.
  2. Sustainable Investment: Capital placement practices that integrate Environmental, Social, and Governance (ESG) aspects as well as Sharia principles.
  3. Prohibited Entities: Companies or institutions whose main business activities have a significant negative impact on the environment, society, or the University's reputation.

Intent and Purpose

This policy is established with the objectives of:

  1. Ensuring that UMKT's financial assets are managed in accordance with the principles of Amar Ma'ruf Nahi Munkar (enjoining good and forbidding wrong) and the values of Al-Islam and Kemuhammadiyahan.
  2. Mitigating reputational risks resulting from involvement in sectors that damage the ecosystem.
  3. Supporting global initiatives in climate action, particularly the protection of Kalimantan's forests from permanent destruction.

Scope

  1. This policy applies to all work units, university-owned enterprises, and endowment fund managers within UMKT.
  2. The object of the policy includes money market instruments, capital markets, deposits, as well as direct equity participation in third parties.

Divestment Criteria

UMKT will withdraw from investments in entities that:

  1. Operate in the alcohol, gambling, and entertainment industries that do not comply with Islamic norms.
  2. Are directly involved in the production and distribution of tobacco/cigarette products.
  3. Are directly involved in carbon-intensive energy industries, particularly coal mining and oil exploration, that lack a clear green energy transition plan.
  4. Are legally proven to have caused or allowed Forest and Land Fires (Karhutla) to occur in their concession areas.
  5. Engage in illegal deforestation practices or the destruction of peatland ecosystems.
  6. Have a record of severe violations in the management of hazardous and toxic (B3) waste and greenhouse gas emissions.
  7. Use child labor or engage in forced labor practices.
  8. Are involved in human rights violations or land disputes with indigenous/local communities without fair mediation efforts.

Divestment Mechanism and Procedures

  1. The Finance Department will conduct an audit of the investment portfolio at least 1 (one) time a year.
  2. If criteria violations are found, the University will engage with the entity to encourage improvement during a transition period of up to 12 months.
  3. If there is no tangible improvement, UMKT is obliged to gradually withdraw its capital within a maximum period of 24 months to maintain cash flow stability.

Duties and Responsibilities

  1. Vice Rector II: Responsible for identifying, evaluating, and providing divestment recommendations to the Rector.
  2. Rector: Has full authority to make final decisions regarding the termination of investments or strategic partnerships.

Closing Provisions

This policy will be reviewed every 3 (three) years or at any time if there are significant changes to the Muhammadiyah Central Board policies and national SDG standards.