Responsibank Indonesia as a representative of the C20 attended the C20 Summit with the theme “ Zeroing-in on Asia's Just Energy Transition” which was held virtually on October 5, 2021. The meeting was attended by Responsibank Indonesia, represented by Herni Ramdlaningrum, Fair Finance Japan represented by Yuki Tanabe, Fair Finance India represented by Shreedar Ramawurthi and Bea Victorio as the regional program lead for Fair Finance Asia. The meeting discussed the importance of the role of CSOs in the G20 Summit and the commitments needed to promote a just energy transition (just energy transition) at the domestic, regional and global levels.
"Indonesia will officially hold the presidency of the G20 Summit in 2022. This is a momentum for Indonesia to push for a green economy recovery and strengthen its commitment to sustainability”, said Herni Ramdlaningrum, Responsibank Indonesia.
Herni explained that the role of the G20 is very important in accelerating the global energy transition agenda. The G20 needs to set more ambitious climate commitment targets and ensure a transition process that adopts the principles of 'No one is left behind' so that development practices always pay attention to environmental, social factors including gender and human rights so that access to clean energy can be reached and accepted by all groups. In addition, Shreedar Ramamurthi, Managing Trustee of Environics Trust India also emphasized that the G20 needs to coordinate to mobilize funding to the green energy sector.
"The four priority agendas that we will bring to the G20 Sherpas include: (1) encouraging the implementation of green economy recovery in advancing climate resilience and climate change mitigation, (2) coal as a stranded asset & its financial impact on the banking sector, (3) carbon tax regulations that support emission reductions and (4) promote gender & social inclusion as part of an equitable transition,” said Herni. In addition, he emphasized that the Government of Indonesia should give a clear signal in implementing climate policy commitments and encourage the DPR to immediately issue the New Renewable Energy (EBT) Bill which is still in the process of being discussed.
Regarding the topic of energy transition, a few months ago Responsibank held a webinar in order to soft launch report “Financial PLTU in Indonesia: Funding Flows and Assessment of Banking Credit & Investment Policy”. This study found that foreign and national banks contributed up to 19,4 billion US dollars to finance new coal-fired power plant projects in Indonesia in the 2014-2019 period. Financial institutions from Japan and China became the largest investors in that period, including JBIC (4,7 billion US dollars), China Development Bank (2 billion US dollars) and China Eximbank (1,3 billion US dollars).
Fiona through her presentation said that national banks have started to finance the NRE sector. However, unfortunately this is not supported by the target or commitment to immediately get out of fossil financing. In addition, national banks also do not have emission reduction targets in financing and investment activities in line with the Paris Agreement targets.
“In fact, sustainable finance is a very important instrument in encouraging the achievement of national climate goals, especially in efforts to support funding for adaptation and mitigation of climate change. There is a fairly large funding gap. The Ministry of Finance has implemented budget tagging, but of course the capacity of the APBN is very limited, so it needs to be supported by financing from the private sector, especially banks. Banks can become actors of change to encourage development in a more sustainable direction while solving the problem of the climate crisis through green financing and reducing financing to carbon-intensive sectors”, Said Fiona Ar Mintasari, Researcher The PRAKARSA.
This research raises several recommendations addressed to regulators and financial institutions. Fiona encourages the government and the DPR to immediately issue the EBT Law in order to create competitiveness and a conducive investment climate in the NRE sector. The government also needs to set more ambitious targets in the energy sector through its commitment to Net Zero Emissions (NZE) by 2050. Meanwhile, OJK needs to immediately develop financing guidelines for the energy sector as a basis for financial institutions to develop policies, understand and manage environmental, social, and environmental risks. Governance (LST) and encourage sustainable business practices in the energy sector. OJK should also immediately issue a green taxonomy so that banks have clear classification standards regarding business activities in the energy sector that can be categorized as 'green'.
In addition, Fiona added that banks need to formulate sectoral policies that specifically regulate lending and investment to the energy sector. "This policy needs to support the achievement of the target for reducing greenhouse gas emissions in line with the Paris Agreement target by considering ESG factors and adopting minimum standards that refer to international standards, industry best practices and applicable legal regulations," he said. In addition, he also emphasized the importance of policy coherence and cross-sectoral agendas to support a conducive sustainable finance ecosystem.
