Environment must become factor in credit approval

JAKARTA (JP): State Minister of Environment Sarwono Kusumaatmadja called on bankers yesterday to go green by including environmental considerations in the approval of credit applications.

"Bankers have great influence over the investment process and business trends and can condition entrepreneurs to do green business," Sarwono said in his keynote address at a six-day course on environment and banking.

His statement was read by Liana Bratasida, director for the Technical Guidance section of Bapedal (the Environmental Impact Management Agency).

He said that over the past few years the World Bank, the Asian Development Bank, Inter American Development Bank, European Bank for Reconstruction and Development, and African Development Bank had requested their clients to make environmental assessments of their development projects.

Thirty five bankers from Bank Danamon are taking part in the course, which is held by the Office of the State Minister of Environment and Bapedal in cooperation with the bank.

The course is the second of its kind, according to Liana, the first having been held in cooperation with Bank Pinaesaan. Bank Export-Import has shown interest in the program and may now be the first state bank to take part in a similar course, Bratasida said.

In 1989 and 1990 Bank Indonesia issued circulars saying that environmental aspects should be considered in the approval of loan applications. The inclusion of environmental aspects, however, was omitted in 1991, Mas Achmad Santosa, executive director of the Indonesian Center for Environmental Law, said in a recent interview with The Jakarta Post.

Bratasida, who opened the course on behalf of Sarwono, told journalists after opening the course that she was not aware of the circulars.

"But environmental considerations are included in the tax bill," she said.

Bratasida told the course participants that it was time to include environmental aspects in the corporate policy as evidence of their concrete commitment to sustainable development. Bankers should consider the environmental impacts of the projects they plan to finance, she said.

Without an assessment of environmental management costs, calculations of the returns of investment would not be realistic, Bratasida added.

Bankers should not consider environmental damages as force majeure (loss due to unavoidable disasters) anymore because there is evidence that the damages can be prevented. Bankers are therefore expected not to tolerate any excess polluting resulting from activities they finance, according to Bratasida.

She said that in America and Europe the banks are generally held responsible for environmental damages caused by the projects they finance.

Since May 1992, 62 European banks have signed a declaration sponsored by UNEF (United Nation Environment Funds) to show their commitment to the prevention of environmental damage.

Still rampant

Bratasida said that even though Indonesia has a number of laws and regulations regarding the environment, including the 1982 Environmental Act, polluting problems are still rampant. Therefore, the environmental strategies should be changed from "reactive to pro-active." Emphasizing preventive actions through an on-going campaign will in turn improve public environmental awareness and hopefully tighten economic regulations.

"Command and control alone is not enough. We need mixed tools to prevent environmental damages, we need market-based instruments," she said.

She said it was not easy to change the attitude of business people used to polluting the environment for decades but added, "we must not be pessimistic."

Bank Indonesia and the banks in charge of channeling funds from the Overseas Economic Cooperation Fund have agreed to provide soft loans for the purchase of waste treatment facilities.

"We suggest that the banks also provide soft loans for industrial equipment as a green investment," Bratasida said.(sim)