Jakarta, The PRAKARSA (Institute for Policy Research and Advocacy) – The financing aspect for climate change transition and mitigation is one of the biggest challenges in the climate crisis issue. It is important for CSOs to understand the financial transition and its relationship to inclusiveness and gender.
The PRAKARSA, as the coordinator of the ResponsiBank Indonesia Coalition, has held a training entitled "Inclusive Climate Financing" at the Mercure Sabang Hotel, Jakarta, on Tuesday (17/12/2024). This event involved participants from various civil society organizations (CSOs) that are members of the ResponsiBank Indonesia coalition and several women's organizations.
This training aims to improve participants’ understanding of climate finance and transition finance, and its relevance in supporting sustainability goals in Indonesia. With the increasing need for sustainable finance amidst the climate crisis, this training is crucial to equip CSOs with the necessary knowledge and skills.
Ah Maftuchan, Executive Director of The PRAKARSA In his speech, he said that the funding aspect for the transition and mitigation of climate change is one of the biggest challenges in the climate crisis issue that we are currently facing.
"If we look at COP29 held in Azerbaijan, for example, for the funding issue, although there is an agreement by developed countries to raise at least USD 300 billion or around IDR 4.600 trillion per year for developing countries until 2035. However, if we refer to various data at the global level, this figure is actually still far from adequate," said Maftuchan.
Luthfyana Larasati, Climate Finance Manager of the Climate Policy Initiative (CPI) Indonesia, acted as a speaker in this activity, explaining that understanding climate finance and transition finance is increasingly relevant amidst the increasing impact of the climate crisis, which is marked by increasing natural disasters, especially in Indonesia.
"Indonesia is experiencing a significant increase in natural disasters, with more than 5.000 disaster events in 2023, an increase of 50% from the previous year. This shows Indonesia's vulnerability to the impacts of climate change," said Luthfyana.
In addition, Luthfyana also said that greenhouse gas emissions in Indonesia have increased by more than 52% since 2000. This is one of the main factors that impacts the country's environment and economy, because climate change is also estimated to cause annual economic losses of around USD 14,8 billion.
"To achieve the target of reducing greenhouse gas (GHG) emissions by 31,89% unconditionally and 43,20% with international support by 2030, Indonesia needs costs of up to USD 285 billion, while 51% of these needs have not been met," said Luthfyana.
For that reason, according to Luthfyana, transition finance is an important instrument to support decarbonization and the transition to net zero emissions. It includes support for innovation, infrastructure, and mitigation of social impacts that may arise from the decarbonization process.
"We hope the financial sector can play an active role in funding environmentally friendly projects. Although currently only 3% of private investment is climate-aligned, there is potential to increase contributions through better policies and frameworks," Luthfyana said.
The training also discussed the importance of a gender-responsive transition finance framework, which aims to integrate gender interests into investments for decarbonization.
In this discussion, participants received material from Herni Ramdlaningrum, The Program Manager. PRAKARSA. Herni revealed that although women represent 50% of the world's adult population, they only contribute 37% to global GDP and have limited access to economic resources.
Herni explained the various challenges faced by women, including restrictions on access to jobs and finance in 190 countries. "For example, 47 countries restrict women from seeking employment, and 99 countries normalize the rejection of loans from financial institutions only because of gender considerations," said Herni.
By removing these barriers, it is estimated that women could contribute up to USD 13 trillion in global GDP growth. Although currently only 7% of women are in full-time employment in low-income countries, there is great potential to increase their participation in the economy.
Herni emphasized that if financial institutions are willing to invest in women, they will not only fulfill their social responsibilities but also gain financial benefits. "Data shows that women have lower credit risk than men, making them better potential borrowers," Herni explained.
In addition, on this occasion Herni also highlighted that women's representation in leadership positions contributes to improving business performance. "Companies that place more women at the executive level show better financial results and higher levels of innovation," he said.
Herni also further discussed gender-responsive investment approaches, including the importance of data collection and implementing policies that support gender equality in investment.