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

The research institute PRAKARSA as coordinator for ResponsiBank Indonesia conducted the latest research to see the involvement and commitment of banks in financing the energy transition in Indonesia to achieve the Net Zero Emission (NZE) target. The deepening was carried out by identifying bank financing portfolios in the fossil energy and new renewable energy sectors as well as bank policies and challenges faced by banks in Indonesia. 

In recent years, the climate change mitigation narrative has strengthened. Paris Agreement became one of the agreements of countries in the world to reduce the increase in temperature due to climate change. Indonesia ratified the agreement and renewed its emission reduction target commitment to 31,89% on its own and 43,20% percent with international support by 2030 in the latest NDC (Nationally Determined Contribution) document. 

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

Through this report, ResponsiBank Indonesia found that bank policy in energy transition and climate change mitigation in Indonesia is still low. This policy also affects the proportion of financing portfolios carried out by banks. The results of interviews with several banks indicate that one of the challenges for banks in financing renewable energy is regulatory certainty.  

Check out the full report via the download link below.

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