Video: Opportunities and Challenges for Indonesian Banks to Finance Renewable Energy Projects

The banking sector has begun entering the realm of sustainable financing to support the acceleration of Indonesia’s energy transition, although this has not yet been implemented uniformly across all banks, according to Luthfyana K. Larasati, Senior Manager at the Climate Policy Initiative.

The Indonesian Sustainable Finance Taxonomy (TKBI) serves as a guide to encourage the allocation of sustainable financing towards the 2060 Net Zero Emission (NZE) target. However, as the TKBI is not yet mandatory with specific targets, policy reinforcement is still required to drive capital and financing into sustainable real sectors.

Regarding efforts to promote sustainable financing, Agung Budiono, Executive Director of the Indonesia Cerah Foundation, noted that Indonesia can capitalise on financing opportunities from the RE100 business coalition, which aims to add 99 gigawatts of renewable energy capacity, 43% of which is located in the Asia-Pacific region.

Efforts to attract renewable energy investment are also essential for Indonesia to boost the economy, given that every USD 1 billion increase in renewable energy investment can yield USD 1.4 billion in economic benefits and create up to 2 million jobs. This should be utilised by the banking sector as an opportunity to drive sustainable financing.

Furthermore, Danantara is expected to play a role in providing facilities to support renewable energy sector financing, alongside strengthening governance to provide investment certainty for the renewable energy sector.