Assessing the Impact of the 2026 OJK Sustainable Finance Regulation: A Leap Towards Sustainable Finance or Just Another Administrative Burden?

By Leonard Tiopan Panjaitan, MT, CGPS, CPS (ESG & Productivity Consultant, Member of IS2P)

REPUBLIKA.CO.ID, The global financial landscape is undergoing a tectonic shift. Climate change is no longer a peripheral environmental issue in annual reports, but a systemic risk threatening global financial stability. In Indonesia, the Financial Services Authority (OJK) is responding to this challenge by issuing a Draft Regulation of the OJK (RPOJK) on the Implementation of Sustainable Finance.

This revision of POJK Number 51/2017 is a direct mandate from the Financial System Strengthening and National Economic Recovery Law (UU P2SK), which aims to change the paradigm of the financial sector from voluntary to mandatory. However, the question is: is this regulation sharp enough to drive a real economic transition, or will it be bogged down in bureaucracy and the risk of greenwashing?

The Crucial Role of Definitions and the Taxonomy

One of the critical gaps in this RPOJK is the still-blurred operational definition of “transitional finance.” Although this term is not explicitly used in the RPOJK, the concept has been recognised through the obligation of financing and transition plans.

Therefore, clarity of definition is the primary foundation. This is where the crucial role of the Indonesian Sustainable Finance Taxonomy (TKBI), particularly the update in Version 3, comes in as a technical guide.

For the general public, the TKBI can be likened to a “dictionary” or standard label, similar to the nutritional composition label on food packaging, which classifies economic activities that are truly “green” (environmentally friendly), “red” (high risk), and “yellow” or in the process of transition.

Without a clear guide from the TKBI, banks could claim that providing credit to a factory that only replaces energy-efficient lamps is a “green project,” even though its chimneys are still spewing black pollution. The TKBI is here to ensure that the public and investors are not deceived by misleading claims. The TKBI also ensures that funds saved or invested actually flow to activities that restore the earth, rather than just polishing its image.

Unfortunately, this RPOJK has not fully locked in the close link with the TKBI in the context of transition. Without a strict definition following the taxonomy standard, financial institutions will find it difficult to distinguish between funding for activities that are already green (green finance) and activities that are “brown” and moving towards green (transition finance). The biggest risk is unilateral claims, namely that extending the life of fossil fuel assets can be packaged with a “transition” label, thus triggering greenwashing practices that legalise pollution.