Green Banking Legislation, Standards and Implementation Edi Setijawan

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1 Green Banking Legislation, Standards and Implementation Edi Setijawan Regional Seminar on Innovative Climate Finance Instruments for Financial Institutions June 2017, UNCC, Bangkok, Thailand

2 Sustainable Finance Policy Framework SUSTAINABLE DEVELOPMENT GOALS & CLIMATE CHANGE Law No. 32 of 2009 concerning Conservation and Management of the Environment Indonesian commitment for climate change National Action Plan for the Reduction of Greenhouse Gas Emission (RAN GRK) 1. Sectors Contribution towards the Targeted GHG emissions reduction 2. Financing needs for GHG emissions reduction Long Term National Development Plan (RPJPM) 1. Green Economy 2. Priority Economic Sectors 3. Financing needs for economic development Fulfillment for Sustainable Financing Needs Compliance Resilience Road Map environmental economic instruments Competitiveness Readiness of Financial Services Industry 2

3 Definition & Rationalization Green Economy INDONESIA Sustainable Finance Definition Green Economy is an economic development model based on ecological economic and green economic which aims to answer the interdependence between human economies and ecosystems. Green Economy also aims to answer the negative impact of economic activities on climate change and global warming. Definition Sustainable finance in Indonesia is defined as comprehensive support from the financial service industry to achieve sustainable development resulted from a harmonious relationship between economic, social and environmental interests* Rationalization OJK s policy on sustainable finance bring financial institution to the next level, becomes more responsible and contributive to economic development with longterm vision. * Indonesia Sustainable Finance Roadmap

4 Objective of the Development Of The Roadmap On Sustainable Finance Objective of the Roadmap This roadmap sets forth the detailed work plan on the sustainable finance program ( ) for the financial service industry as governed under the authority of OJK, namely the Banking, capital market and Non Bank Financial Service Industry (IKNB) sectors. This roadmap on sustainable finance as part of the Master Plan for Indonesia s Financial Service Sector (MPSJKI) Specify the measures and recommendations that need to be adopted in the form of an integrated work plan involving all financial service institutions. This work plan may be revised and adjusted periodicallyas deemed necessary. Sustainable finance comprised of the following dimensions: 1. Achieve industry, social and economic superiority in order to address the threats of global warming and mitigate other environmental and social issues; 2. Aims to encourage the shifting of the target towards a competitive low carbon economy; 3. Strategically promoting environmentally friendly investment in various business/ economic sectors; and 4. Supporting the principles of development in Indonesia as stated in the RPJM, namely the 4P (pro-growth, pro-jobs, pro-poor, and pro-environment). 4

5 Strategic Goals and Activities to Implement Sustainable Finance 5 Strategic Goals Strategic Activities Increase supply of sustainable financing to strengthen competitiveness of national financial service industry Through provision of incentives to FSI to increase green products portfolio, encourage innovation, increase competency, information sharing and increase access to global public fund Increase demand of environmentally friendly financing products Through public awareness and education on green investment and green financing Increase oversight and coordination of sustainable finance implementation Through the strengthening of risk management, corporate governance in environmental and social aspects, as well as the acceleration of the implementation of the Environmental Law

6 SUSTAINABLE FINANCE ROADMAP ACHIEVEMENTS Green Lending Models (renewable energy, energy efficiency, green building projects, and organic agriculture), ESG guidelines for selected industry (palm oil), understanding environmental impact assessment document for Financial Institutions. Raising awareness Programs: Seminars, Focus Group Discussions, SBN 4th annual meeting. Capacity building programs: Training Environmental and Social Risks for Financial Institution and Fis supervisors (basic and intermediate level, ToT). ( about 600 officers); hand over Training Module on Sustainable Finance to some universities and training institutions. Providing an integrated information in Sustainable Finance Information Hub (webbased) Policy coordination with governments, International agencies, NGOs, and other stakeholders. Industry participations through a Pilot Project Indonesia First Movers on Sustainable Banking. Its followed by 8 banks (state owned bank, regional bank, private owned bank and Islamic bank) Joint research program on Sustainable Finance with some universities and international organizations (project based financing for green infrastructure, green bond) Draft of OJK Regulation on Sustainable Finance International Fora: G-20 GFSG, SBN, ASEAN Sustainable Capital Market.

7 SUSTAINABLE FINANCE ROADMAP PROGRAMS OJK Regulation of Sustainable Finance, Green Credit Guidelines, Green Bond Guidelines, Green Insurance Guidelines, Sustainability Report. Capacity building programs: Training Environmental and Social Risks for Financial Institution and Fis supervisors (basic and intermediate level, ToT), Bali Sustainable Finance Center. Policy coordination with governments, International agencies, NGOs, and other stakeholders. Industry participations through a Pilot Project Indonesia Second Movers on Sustainable Finance. Its will followed by bank and non bank FIs. Joint research program on Sustainable Finance with some universities and international organizations (project based financing for green infrastructure, green bond, green insurance, etc) International Fora: G-20 GFSG, SBN, ASEAN Sustainable Capital Market, ASEAN Forum on SF Baseline Survey implementation of Sustainable Finance Roadmap

8 Based on IFC/SBN Input Paper to G20 Green Finance Study Group STOCK-TAKING SBN-IFC PRESENTED IN INPUT PAPER TO G20 GREEN FINANCE STUDY GROUP (GFSG) IN JUNE, 2016 description Bangladesh Brazil China Colombia Indonesia Kenya Mexico Mongolia Nigeria Peru Turkey Vietnam Environmental X X X X X X X X X X X X Social X X X X X X X X X X X X Risk Management X X X X X X X X X X X X Loan Orgination X X X X X X X X X X X Policy-Led (Regulatory guideline) X X X X X Industri-led (Policy and industry-led X X X X X X Blended (Policy and Industry-led) X Scope Banking X X X X X X X X X X X X Expanding to wider financial sector X X X X Awareness raising/consultation National sustainable development roadmap Sector-specific guidelines or checklists X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Inter-agency collaboration X X X X X X X X X X Capacity building of regulator X X X X X X X X X Capacity building of Fis X X X X X X X X X X X X Disclosure requirement for Fis X X X X X X X X X X X X Supervison by regulator X X X X X X X Monitoring & evaluation X X X X X X X X X Market incentive on green lending X X X X X Award X X X X 8

9 Thank You disclaimer: this presentation is not an official presentation, for seminar purpose only. Further information to