OJK Prepares ESG Transition Regulations to Expand Green Credit

The Financial Services Authority (“ OJK ”) is currently preparing a new bridging policy under the Indonesian Sustainable Finance Taxonomy (Taksonomi Keuangan Berkelanjutan Indonesia- “ TKBI ”) to ensure a smooth transition process without overburdening the industry. One of the measures includes revising Regulation of the Financial Services Authority No. 51/POJK.03/2017 on the Implementation of Sustainable Finance for Financial Service Institutions, Issuers, and Public Companies (“ POJK 51/2017 ”).

The Chief Executive of Banking Supervision at OJK, Dian Ediana Rae, stated that the series of Sustainable Finance initiatives, such as Climate Risk Management and Scenario Analysis (“ CRMS ”) and the currently developing TKBI, could create new investment opportunities in nature-based solutions.

“Through the revision of POJK 51/2017, OJK ensures that the financial sector not only safeguards itself against climate-related risks but also plays an active role in financing the transition toward a green and climate-resilient economy,” Dian stated to Hukumonline.

It is noted that the majority of green credit disbursement is dominated by large banks, particularly Himbara. However, a positive trend is beginning to emerge among national private banks and Regional Development Banks (Bank Pembangunan Daerah- “ BPD ”), which are starting to develop green portfolios and products oriented toward Environmental, Social, and Governance (“ ESG ”) principles, albeit on a limited scale. “Completion is targeted within this year,” she added.