Indonesia’s Financial Services Authority (OJK) Commissioner Muliaman Darmansayah Hadad has spoken out to promote sustainable finance in the country in order to achieve the UN Sustainable Development Goals (SDGs). The Commissioner highlighted the necessity of injecting funding into sectors with a high multiplier effect to boost final income, in accordance with the OJK’s Roadmap for Sustainable Finance.
The OJK’s Sustainable Finance Framework
The Roadmap lays out a plan for achieving a “harmonious relationship between economic, social and environmental interests” through comprehensive financial services industry support. Under the plan, sustainable finance is necessary to address threats of global warming and other environmental issues, the shift to a low carbon economy, promotion of environmentally friendly investment, and to achieve Indonesia’s pro-growth, pro-jobs, pro-poor and pro-environment development goals.
Related: Indonesia: World Bank Pledges $10bn for Infrastructure, Poverty Reduction
In practice, the aims of the Roadmap are to promote environmental risk management in financial services institutions, increasing financing for sustainable infrastructure, industry, energy and agriculture, implement a robust environmental reporting framework, and develop human resource capacity within the industry.
The Roadmap lays out plans to develop fiscal incentives including tax holidays and feed-in-tariffs, as well as non-fiscal targeted loans and guaranteed over 2016-18. 2016 is also scheduled to see the development of an integrated sustainable finance information hub by OJK.
Green Bonds in the Haze
Over 2015-2024, OJK is to provide support to government institutions and industry practitioners in the development and issuance of green bonds. Green bonds are coming into the limelight. The World Bank Treasury issued its first green bond in 2008, and by mid-2015 there were $65.5 billion of green bonds outstanding globally.
As around three quarters of the country’s emissions come from deforestation, peat clearance and peat fires, sustainable agriculture should be the target market. As Indonesia has pledged to cut its greenhouse gas emissions by 29 percent by 2030, we expect these financing mechanisms to come further into prominence.
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