Tracking Banking Sector Progress in Financing Indonesia's Energy Transition to Accelerate Net Zero Emissions

In recent years, the narrative of climate change mitigation has strengthened. The Paris Agreement is one of the agreements of countries in the world to suppress the increase in temperature due to climate change. Indonesia ratified the agreement and renewed its commitment to the emission reduction target to 31.89% with its own efforts and 43.20% percent with international support by 2030 in the latest NDC (Nationally Determined Contribution) document.

Meeting the GHG (Greenhouse Gas) emission target by 2030 according to NDC is estimated to cost around USD 250 billion. Banks can play a strategic role in accelerating the energy transition by contributing to green project financing, sustainable development, carbon trading facilitation, green bond issuance or other financing schemes such as green sukuk or green climate fund.

In this study, Responsibank found that the policies of banks in Indonesia with regard to energy transition and climate change mitigation is still low. These policies also affect the proportion of financing portfolios carried out by banks. The results of interviews with several banks show that one of the challenges for banks in financing renewable energy is regulatory certainty.

Check out the full report via the download link here.