The Sustainable Finance Sector in Indonesia is Still Facing the Gap between Regulation and Implementation

thePRAKARSA - Indonesia is considered to have achieved a lot of progress in the field of regulation of sustainable finance. However, there is still a gap between regulation and practice in the field. According to the Coordinator Response Bank Indonesia as well as Executive Director of The PRAKARSA, Ah Maftuchan, presence Green Taxonomy 1.0, the Law on the Development and Strengthening of the Financial Sector (UU PPSK), and sustainability banking is proof of the progress that Indonesia has in the field of sustainable finance.

"But if we want to go into more detail, it's still far away gap between this good regulation and practice in the field. so that one of our future agendas that we propose to all of us is let's push the implementation of these good regulations to make them more concrete, so that they are more advance, Let us close the gap for regulation with implementation,” said Maftuchan at the opening Human Rights and the Banking Sector Training which is held Response Bank Indonesia together Deep, on Tuesday (20/12/2022).

Furthermore, Maftuchan also said that Indonesia is currently at a good momentum, both domestically, regionally and globally. "After yesterday we became the presidency of the G20, we have succeeded in pushing for a number of quite innovative things, for example in the declaration of the G20 leaders which was agreed upon. G20 member countries commitment to encourage birth sustainability report in the financial industry. Then tomorrow in 2023 we Indonesia will also hold it chairmanship ASEAN,” said Maftuchan.

According to him, Indonesia has also become one of the countries that has contributed to the birth of a more sustainable financial industry and a commitment to implementing ESG principles in work or in business activities. "ASEAN currently also has ASEAN green taxonomy 1.0 and this will continue to be developed so that it is sharper and continues to be contextual to the development of the situation. Let's continue to strengthen our commitment and our contribution to business activities that are more environmentally friendly, business activities that are more socially friendly business activities that strengthen the reduction of poverty and inequality so that we can create a better condition in the future,” added Maftucha.

Virtually present as a speaker on this occasion was Juliette Laplane, a senior researcher from Profundo. In her presentation, Juliette explained, the relationship between financial institutions and the impact on human rights (HAM) in general is often difficult to understand.

According to him, this can be seen from the side whether financial institutions through their activities, whether intentional or not, automatically eliminate or reduce the ability of a person or group of people to get their rights as human beings. "Such as whether in the activities of financial institutions there has been discrimination, sexual and verbal harassment, gender inequality, destruction of trade unions," said Juliette.

However, Juliette also explained, the work of a bank or financial institution does not only focus on the risks themselves but also pays attention to the risks that impact society. “Banks must assess environmental and community risks in the correct order. Banks must develop general policies on various human rights topics, for example labor rights and so on," said Juliette. According to Juliette, OHCHR and OECD have issued several guidelines for implementing normative standards in the financial sector.

For this reason, financial institutions are expected to embed human rights into relevant policies and management systems. In addition, banks must also identify actual and potential adverse impacts on loans and investments. “Can be done using leverage to influence clients and or investment companies that cause adverse impacts to prevent or reduce these impacts. taking into account how these adverse impacts can be handled, by tracking performance and communicating results,” concluded Juliette.

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