Jakarta, The PRAKARSA – Coalition Response Bank Indonesia as a coalition of civil society working to promote responsible financing policies and practices to re-release reports related to banking performance in implementing sustainable finance in Indonesia.
This fifth report is conducted to assess banking performance from various aspects according to international financial guidelines/methodologies developed by the Fair Finance Guide International (FFGI). This assessment was conducted at 11 banks in Indonesia, which represent the largest group of commercial/commercial banks in Indonesia both in terms of total assets and core capital. The 11 banks are Bank BNI, BRI, Mandiri, BCA, CIMB Niaga, Danamon, Maybank, BJB, Permata Bank, DBS and HSB.
There were four banks that experienced a downgrade, namely Maybank, BNI, Bank Permata and BJB compared to the 2020 assessment. Of the four banks, BNI experienced the most significant decline, from fifth to ninth in 2022. BNI did not get a score of 9 the theme assessed because in the documents published by BNI found no disclosure of related information or policies.
Even though there has been an increase in commitments and policies from the environmental, social and governance aspects, they are not satisfactory enough because they are still in the “very poor” and “less” categories. "Indeed there has been progress in the banking sustainability policy in Indonesia, but the score is still very low and has not moved significantly. Banks in Indonesia have not dared to set high targets," said Ah Maftuchan, Executive Director of The PRAKARSA and Coalition Coalition Coalition ResponsiBank Indonesia.
For example, on the theme of climate change, the highest point is still in the moderate value range (4,0). Some banks even get a score of 0,0 on this theme, such as BNI, BCA and BJB. These three banks still do not have measurable targets for reducing Greenhouse Gas (GHG) emissions, both for their operational activities and their financing. Even though several banks have started to move to support the Net Zero Emission target, unfortunately there has been no commitment to stop the portfolio into the coal sector. For example, BRI, although it already has a list of exceptions for financing assets related to fossil fuels, has not found a written commitment/policy regarding this matter.
"The financial sector plays an important role in supporting sustainable financing, for this reason it is time for financial institutions to have written and explicit policies related to financing commitments made. Furthermore, the role of OJK here is very important, so OJK also needs to develop incentive and disincentive schemes to attract banks to implement a green taxonomy," concluded Maftuchan.
Dwi Sawung, WALHI's infrastructure and spatial planning campaigner added, "The new bank's sustainability report displays emission reductions from its operational activities, yet shows more clearly how much bank financing is for sectors that have high emissions such as coal, fossil power plants and plantations that clear forests. The reduction plan or when to stop financing dirty energy that causes climate change is also not clear. From there it can be seen that the banking commitment to climate change is still weak.”
Furthermore, Maftuchan explained that the theme of financial inclusion and consumer protection again received the highest average score in the assessment. Banks in Indonesia still tend to focus on increasing financial inclusion through digitalization and providing bankless financial services. On the other hand, on the theme of human rights and gender equality, many banks are still in the lowest score category.
Banking commitments related to respect for human rights (HAM) and anti-discrimination have not shown a significant increase. In relation to compliance with human rights, only HSBC, CIMB Niaga and BCA have shown a commitment to comply with human rights through their policies but in this 2022 ranking Bank BNI, Mandiri, Danamon, BJB and Permata Bank do not yet have policies related to compliance with human rights principles.
The hope is that banks need to have written and explicit policies related to more responsible financing commitments by setting criteria, safeguarding, to due diligence for loans to high-risk sectors of the economy. Banks also need to accelerate financing to the green sector to support the implementation of a green taxonomy and contribute to improving the environment and people's welfare.
TuK Indonesia said that banking practices in Indonesia are still far from being prudent. This can be proven by the discovery of 213 oil palm plantation business units planting in forest areas in Central Kalimantan Province based on the Decree of the Ministry of Forestry and Environment Phase XI Number 196/2023 concerning business activities that have been established in forest areas that do not have permits in the field of forestry. These companies are affiliated with various groups of large-scale plantation companies, many of which are provided with bank financing facilities. Furthermore, based on data from the government of Central Kalimantan, out of 213 companies only 71 have permits in the plantation sector, the remaining 142 companies are unlicensed. This finding raises the fact that banks are still negligent in conducting a more comprehensive assessment regarding financing for the oil palm plantation industry which poses a risk to Indonesia's forests.
The Financial Services Authority as an institution that regulates banking can accelerate the implementation of sustainable finance and green financing by implementing a green taxonomy mandatory. OJK also needs to develop incentive and disincentive schemes to attract banks. Furthermore, to ensure the implementation of a green taxonomy, a task force consisting of all stakeholders, including CSOs and the private sector, is needed.
"OJK must strengthen supervision, especially to dare to narrow down banks that are still financing companies that have planted oil palm in forest areas. Of course, if this supervision is not carried out, it will create a reputational risk impact on the bank itself. Second, the OJK will immediately establish task force multi-stakeholder sustainable finance by prioritizing the participation and input of various stakeholders who have been underrepresented so far but have been negatively affected by the exploitation of natural resources. Third, the government, especially the Ministry of Environment and Forestry, can take legal action on the findings of oil palm plantations in the forest area," said Linda Rosalina, Executive Director of TuK Indonesia.
A complete report regarding Bank Ratings can be downloaded here:
