POLICY AND REGULATION SUSTAINABLE FINANCE IN INDONESIA

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1 POLICY AND REGULATION SUSTAINABLE FINANCE IN INDONESIA EDI SETIJAWAN Disclaimer: This presentation is not an official document and for seminar only. Further information to

2 ROADMAP SUSTAINABLE FINANCE Sustainable Development Goals n Climate Change Agreement Global Financial Reform Agenda National Commitment and Medium Term National Development Plan Limited Government Budget creates financing Gap, private should participate Raising concern on Environmental, Social Risk and Governance (ESG) Financial System Stability Sustainable Low Carbon Economic Growth Integrated Financial Service Sector Approach (Banking, Capital market, Nonbank Financial Institution) Macro and Micro Prudential Information Hub Coordination Forum INFORMATION & INTER- CONNECTION INSTITUTION OJK FSI OJK Financial Services Supervision, Education & Customer Protection Awareness Institutional Building Integrated Rsk Management Accounting REGULATION & STANDARD HUMAN CAPITAL Strategic Partner Curriculum Certification Formal education Sustainable Finance Rooadmap I ( ), II ( ) 2

3 REGULATION OF OJK NO. 51/POJK.03/2017 ON APPLICATION OF SUSTAINABLE FINANCE TO FINANCIAL SERVICES INSTITUTION, ISSUER AND PUBLICLY LISTED COMPANIES Sustainable Finance shall mean comprehensive support from financial services sector to create sustainable economic growth by harmonising economic, social and environmental interests. Sustainable Financial Product and/or Service shall mean financial product and/or service that integrate economic, social and environmental aspects, as well as the governance within its features. Sustainable Financial Action Plan shall mean written document containing FSI short term (one year) and long term (five years) business plans and work programmes relevant to the principles applied to Sustainable Finance, including strategy to realise the said work plans and programmes according to the predetermined targets and timeline, taking into account the principle of prudence and application of risk management. Corporate Social and Environmental Responsibilities, hereinafter referred to as CSER, shall mean commitment to participate in sustainable economic development to improve life and environmental quality favourable to the company itself, local community and public in general. Sustainability Report shall mean report made public, containing economic, financial, 3 social and environmental performance of FSI, Issuer and Publicly Listed Company in running sustainable business.

4 REGULATION OF OJK NO. 51/POJK.03/2017 ON APPLICATION OF SUSTAINABLE FINANCE TO FINANCIAL SERVICES INSTITUTION (FSI), ISSUER AND PUBLICLY LISTED COMPANIES 1. FSI, Issuer and Publicly Listed Company shall apply Sustainable Finance Principles in their business activities. responsible investment sustainable business strategy and practice social and environmental risk management governance informative communication inclusive priority sector development coordination and collaboration 2. To apply the Sustainable Finance Principles, FSI shall prepare Sustainable Finance Action Plan. 3. FSI, Issuer and Publicly Listed Company that are not FSI required to perform CSER shall allocate a portion of their CSER funds to support Sustainable Finance application activities. 4. FSI, Issuer and Publicly Listed Company shall prepare Sustainability Report. 5. FSI, Issuer and Publicly Listed Company that effectively apply Sustainable Finance may 4 be incentivised by the Financial Services Authority. 6. Any violation by FSI, Non-FSI issuer and Non-FSI Publicly Listed Company hereof shall be punishable with administrative sanctions in the form of written admonition or warning.

5 TIMELINE COVERAGE Commercial Bank BUKU 4, BUKU 3, Foreign Bank BUKU 2, BUKU 1 Rural Bank BANKING BPRKU/BPRS 3 BPRKU/BPRS 1, BPRKU/BPRS 2 CAPITAL MARKET Large scale Issuer and Public Listed Company securities company that administers securities customer account, and medium scale Issuer Issuer with small scale asset, securities company that does not administer securities customer account. NONBANK FINANCIAL INSTITUTION financing company, Islamic financing company, venture capital company, Islamic venture capital company, infrastructure financing company, insurance company, Islamic insurance company, reinsurance company, Islamic reinsurance company, Indonesian Export Financing Institution, secondary mortgage company, Social Security Administering Board pawnshop company, underwriting company, and Islamic underwriting company pension fund with total asset of at least One Trillion Indonesian Rupiahs

6 SUSTAINABLE FINANCE POLICY TO SUPPORT CLEAN ENERGY POLICY Challenges: Limited Financing Access to RE and EE project from Bank High interest rate Consider RE and EE as high risk investment Way out: Commercial Banks has limited fund for long term financing. Explore other resorces from Capital Market and Nonbank Financial Institution. Reducing interest rates with mixed funds, transfer risk (guarantee mechanism). Green Financing guidelines and capacity building for FIs about RE and EE investment. 6