Are Indonesian Banks Ready to Account Climate-Related Matters?

An analysis of Indonesian commercial banks reveals that while there is 100% compliance with mandatory sustainability reporting under POJK 51, the quality of these reports lacks the technical depth required by international standards like the TCFD. Between 2019 and 2021, ESG portfolios reached USD 3.6 trillion, but over 70% of this was directed toward MSME financing rather than green activities. Private banks show a higher proportion of green finance (41%) compared to state-owned banks (23%), yet the total commercial bank contribution meets only 9% of the USD 285 billion needed for Indonesia's 2030 climate goals. Significant gaps exist in risk management, with fewer than 15% of banks integrating climate-related risks into their overall risk frameworks, and none incorporating climate impacts into their financial statements.

• Indonesian banks demonstrate high compliance with mandatory reporting, but the quality of disclosures remains insufficient when compared to global benchmarks. While there was "100% compliance with mandatory annual submission of Sustainability Reports from 2019 to 2021", the current POJK 51 standards provide "high-level sustainability disclosure" that lacks the specific technical detail on climate-related risks and opportunities emphasized by the TCFD.
• ESG financing is heavily skewed toward social and MSME activities rather than environmental goals. Between 2019-2021, the ESG portfolio totaled USD 3.6 trillion, but "on average, more than 70% of ESG finance went to MSME activities, while less than 30% went into green activities".
• There is a notable disparity in green finance mobilization between private and state-owned banks. Private banks allocated 41% of their ESG portfolio to green activities, whereas state-owned enterprise banks allocated only 23%.
• Commercial banks are not meeting the investment needs required for Indonesia's 2030 climate goals. Their green portfolio contributes only "9% of the total investment needs of USD 285 billion", falling short of the OJK's estimated private climate-related investment potential of "up to USD 458 billion within the period of 2016 – 2030".
• Banks have failed to integrate climate risks into formal financial and risk management systems. None of the surveyed banks account for climate-related impacts in their financial statements or include climate risks in mandatory OJK risk reporting, such as the Internal Capital Adequacy Assessment Process (ICAAP). Furthermore, "less than 15% have begun processes for identifying, assessing, and managing climate-related risks" within their overall risk management frameworks.

APA

Climate Policy Initiative (2022). Are Indonesian Banks Ready to Account Climate-Related Matters? https://www.climatepolicyinitiative.org/publication/are-indonesian-banks-ready-to-account-climate-related-matters/

Chicago

Climate Policy Initiative. Are Indonesian Banks Ready to Account Climate-Related Matters? 2022. https://www.climatepolicyinitiative.org/publication/are-indonesian-banks-ready-to-account-climate-related-matters/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Are Indonesian Banks Ready to Account Climate-Related Matters? |date=20 December 2022 |url=https://www.climatepolicyinitiative.org/publication/are-indonesian-banks-ready-to-account-climate-related-matters/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2022are, author = {{Climate Policy Initiative}}, title = {{Are Indonesian Banks Ready to Account Climate-Related Matters?}}, institution = {Climate Policy Initiative}, year = {2022}, month = dec, url = {https://www.climatepolicyinitiative.org/publication/are-indonesian-banks-ready-to-account-climate-related-matters/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }