JAKARTAJuly 28, 2026 — Indonesian Civil Society, along with several civil society organizations (CSOs) from various countries, urged the banking sector to strengthen its accountability in financing sectors at risk of driving deforestation and forest fires. The call was delivered through open letter which was sent to 190 financial institutions in various countries ahead of the potential strengthening of the El Nino phenomenon that will occur until 2027. In Indonesia, the letter was addressed to Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI), Indonesia Eximbank, Panin Bank, and Bank Danamon Indonesia.
Based on projections from the National Oceanic and Atmospheric Administration (NOAA) and the World Meteorological Organization (WMO), El Niño is expected to develop into a moderate to strong category until 2027. This condition has the potential to increase drought in tropical areas, increase the risk of forest and land fires, and threaten food security and people's livelihoods.
This risk has been evident since the beginning of the year. Nusantara Atlas data shows that as of June 2026, the cumulative area burned in Indonesia had reached 103.144 hectares. The ten provinces with the highest burned areas include East Nusa Tenggara, West Kalimantan, Riau, South Papua, West Nusa Tenggara, Maluku, Riau Islands, East Java, Central Papua, and Southeast Sulawesi. Meanwhile, as of July 27, 2026, the cumulative number of fire hotspots in Indonesia reached 96.736, with West Kalimantan recording the highest number, at 14.933, or around 15% of the national total, indicating the province's high vulnerability to forest and land fires.
On the other hand, Forests & Finance data shows that from 2016 to 2025, global financial institutions channeled at least US$429 billion to the timber, soy, rubber, pulp and paper, palm oil, and cattle farming sectors, sectors that are major drivers of deforestation and contribute to the increased risk of forest and peatland fires. Furthermore, from 2016 to 1024, banks also channeled US$32 billion in loans and guarantees to mining operations in Indonesia. Of this amount, the 20 largest banks controlled approximately 81%, or US$26 billion (Rp386 trillion), with Bank Mandiri as the largest financier, amounting to US$6,4 billion (around Rp96 trillion). This substantial financing flow demonstrates that the financial sector plays a crucial role in both addressing and preventing the risk of environmental damage through its financing policies.
TuK INDONESIA Executive Director Linda Rosalina stated that while El Niño is a natural phenomenon, the extent of the fires' impact is determined by how forests and land are managed. She explained that the fire risk is exacerbated by forest clearing, peatland drainage, and financing decisions that continue to support these practices. "El Niño cannot be prevented, but its impact can be minimized if the financial sector stops funding business models that destroy forests. Therefore, the financial sector cannot be positioned as a neutral party in addressing the climate crisis," Linda said.
TuK INDONESIA also highlighted the importance of implementing due diligence (due diligence) across the entire bank financing portfolio. One example of concern is Bank Danamon Indonesia, which is majority owned by Mitsubishi UFJ Financial Group (MUFG). Although MUFG and Bank Danamon have adopted a policy No Deforestation, No Peat, No Exploitation (NDPE) For financing the palm oil sector, the Rainforest Action Network (RAN) 2025 report noted that Bank Danamon continued to provide a US$281 million credit facility to PT Tunas Baru Lampung Tbk (TBLA) from 2020 to 2022. The company reportedly converted thousands of hectares of peatland in South Sumatra and experienced fires in its concession in 2023.
TBLA's subsidiary, PT Dinamika Graha Sarana (PT DGS), has also been found responsible for the land fires by the Kayuagung District Court and ordered to pay compensation and undertake environmental restoration, although the legal process for the case is still ongoing. According to Linda, this case demonstrates that sustainability commitments must be demonstrated through consistent implementation, not simply as company policy. "NDPE commitments must be implemented through due diligence processes across all clients and financing portfolios. Without it, sustainability policies will remain mere promises on paper, while the ecological damage and social costs continue to be borne by the community," she stressed.
Similarly, Aryanto Nugroho, National Coordinator of PWYP Indonesia, emphasized that the financial sector's commitment to not fund forest and peatland destruction will be illusory if it continues to finance the mining sector and coal-fired power plants. "Bank sustainability policies must not be selective. Stop financing peatland destruction, stop funding mining, and immediately phase out support for coal-fired power plants," Aryanto asserted.
Executive Director PRAKARSAVictoria Fanggidae highlighted that banks' preparedness to face these risks is measurable. The Bank Rating Report issued by the Indonesian ResponsiBank Coalition places the average bank policy score at only 2,1 out of a maximum of 10. On the forestry theme, the average score rose from 1,1 in 2022 to 2,0 in 2024, still far from adequate. "This low score means that most banks' forestry policies have not yet reached the critical milestones, such as a ban on peatland conversion, respect for community rights, and supply chain transparency. As El Niño approaches, these policy weaknesses are turning into real risks on the ground," Victoria said. She urged the Financial Services Authority (OJK) to strengthen the Indonesian Sustainable Finance Taxonomy and issue binding derivative regulations, accompanied by independent audits and incentive and disincentive schemes, so that banks' sustainability commitments can be verified.
The National Coordinator of Peat Monitoring, Iola Abas, explained, “Pantau Gambut analysis found that approximately 3 million hectares of peatland burned between 2015 and 2024, with a significant increase in El Niño years. El Niño should not be used as an excuse for peatland fires. While the phenomenon does increase drought and the risk of fire, it is not the sole cause of disasters. The impacts are far greater when peatlands have been drained, converted, and left unrecovered. Ahead of the 2026/2027 El Niño, the government must evaluate concessions that have repeatedly burned and ensure that hydrological function is truly restored. Financial institutions should also not continue to support business activities that maintain this vulnerability. If this condition is allowed to continue, peatlands will remain vulnerable to fire, while the impact and costs of restoration will again be borne by the community.”
Amid the threat of an El Niño emergency, Adam Putra Firdaus, Head of the Forestry and Biodiversity Division of the Indonesian Center for Environmental Law (ICEL), emphasized that forest and peatland destruction should not only be viewed as the actions of perpetrators on the ground, but also as the result of funding flows that support destructive activities. Therefore, it is time for financial institutions to be seen not as neutral parties, but as actors who must also be held accountable if they continue to provide funding to perpetrators of forest and peatland destruction. "From a civil law perspective, such actions can be linked to the doctrine of tort, especially when there is a failure to implement adequate due diligence or when funding is provided despite early knowledge of the environmental damage and its impact on public safety. There should be no financial gain built on funding forest and peatland destruction that exacerbates the climate crisis," said Adam.
Responding to the high risk of fires in West Kalimantan, WALHI West Kalimantan Regional Executive Director Sri Hartini said that the province has approximately 2,79 million hectares of peatland currently burdened with at least 135 oil palm plantation permits, 35 Forest Utilization Business Permits (PBPH), and 123 Mining Business Permits (IUP). According to her, following the major fires in 2015, WALHI West Kalimantan found many companies whose concessions experienced fires due to poor peat management, including the construction of canals that dry out the peat and increase its vulnerability to fire. To date, restoration of burned areas has not been adequately carried out, while sanctions imposed have not had a deterrent effect. "As a result, practices that damage peat ecosystems continue to be repeated and the risk of fire remains high. Therefore, financial institutions must stop providing financing to business actors who continue to cause repeated damage," Sri Hartini emphasized.
Jambi Province faces a similar situation, which has long been one of the regions with a high level of vulnerability to forest and land fires. The Executive Director of WALHI Jambi, Oscar Anugrah, emphasized that the banking sector must not simply provide capital without being responsible for the impact of its financing. All financing must be ensured not to support forest destruction, environmental law violations, or the appropriation of community living space. He stated that the threat of El Niño in the 2026/2027 period has the potential to increase the risk of recurring forest and land fires in Jambi. "Financial sector accountability is a crucial part of stopping the ecological crisis. Banks must ensure that the financing they disburse does not exacerbate environmental damage, but instead promotes fair and sustainable natural resource management," Oscar emphasized.
Through the open letter, civil society organizations from various countries urge financial institutions to strengthen NDPE policies, ensure that all clients in risky sectors do not use fire or convert forests and peatlands, stop financing companies that do not comply with these commitments, increase support for sustainable agricultural practices such as agroecology and agroforestry, and not provide new financing, refinancing, or guarantee services to companies that have been found legally responsible for forest and land fires until all environmental restoration obligations are met.
Note:
- Mitsubishi UFJ Financial Group (MUFG) and Bank Danamon adopting a No Deforestation, No Peat, No Exploitation (NDPE) policy in 2021 for financing the palm oil sector. Rainforest Action Network (RAN) Report 2025 noted that Bank Danamon continued to provide a US$281 million credit facility to PT Tunas Baru Lampung Tbk (TBLA) throughout 2020-2022. The report stated that TBLA converted nearly 7.800 hectares of peatland in South Sumatra. In 2023, fires broke out in two concessions managed by the company. Meanwhile, through Kayuagung District Court Decision Number 38/Pdt.Sus-LH/2024/PN Kag dated June 16, 2025, PT Dinamika Graha Sarana (PT DGS), a TBLA subsidiary, was found responsible for the 6.360-hectare fires. The court ordered the company to pay environmental compensation of IDR 184,39 billion and carry out environmental restoration worth approximately IDR 1,79 trillion. TBLA previously denied various allegations related to alleged peatland destruction.