Fostering sustainable finance instruments together

Jakarta, 18 February 2022 –

Bank Indonesia Governor, Perry Warjiyo, officially opened the seminar, Scaling Up the Utilisation of Sustainable Finance Instruments (18/02), which highlighted the issue of developing sustainable finance as one of the six priority agendas in the financial track of Indonesia’s G20 Presidency in 2022. During the Leader’s Insight session, Governor Perry Warjiyo confirmed that the G20 Sustainable Finance Working Group had collaborated with a focus on developing Sustainable Finance Instruments (SFI), while overcoming the various implementation challenges, to support a green and sustainable economy. Collaboration between the government and authorities will be improved to develop an ecosystem that maintains long-term SFI continuity in the market. Meanwhile, the Chairman of the Association of Indonesian Private Commercial Banks (PERBANAS), Kartika Wirjoatmodjo, reiterated the commitment of financial institutions in Indonesia to support a sustainable financial market ecosystem, as reflected by improving SFI performance. Moving forward, collaboration between financial institutions, the government, BI and OJK will actively promote financing and financial market instruments that prioritise environmental, social and governance (ESG) criteria.

Bank Indonesia Governor, Perry Warjiyo, also outlined three strategies to increase SFI. First, the importance of developing instruments of green finance and investment to foster sustainable and inclusive economic growth, as a new source of growth, while expanding the workforce and supporting the Paris Agreement 2030. Second, the importance of developing an ecosystem of sustainable finance instruments. This could be realised with the support of all relevant parties through incentive and disincentive policies, while building resilient infrastructure, including other critical elements, such as green taxonomy, verification services, green certification bodies and green ratings agencies. In conjunction with the government, Bank Indonesia will develop a green ecosystem in Indonesia through policies and support for green money market instruments, green and inclusive financing for MSMEs as well as a sustainable sharia economy and finance. Third, capacity building programs and continuous technical assistance are essential to increase the understanding and expertise of all parties. Successful SFI development will be determined by strong collaboration, togetherness and mutual support among all stakeholders.

The subsequent Casual Talk session presented two panel discussions. First, Strategic Outlook (Global Trends, International SFI Best Practices and ESG Portfolio Management, and second, Green and Sustainable Instruments as Alternative Financing and Investment and Indonesia’s SFI Future Direction. The first panel discussion between international practitioners described various alternative sustainable instruments available in the international market, for example green bonds, sustainable bonds and sustainable-linked bonds as well as money market instruments, such as negotiable certificates of deposit and repos, and KPI-linked derivative instruments, all of which integrate green, social and sustainable aspects. Meanwhile, the second panel discussion focused on the direction of SFI adoption in Indonesia. OJK took the opportunity to extend its support for SFI implementation through the Indonesia Green Taxonomy and regulatory framework for carbon exchange. From a banking perspective, the SFI implementation strategy includes issuing green bonds and sustainable finance using funds for green projects and the MSME market. In addition, a representative from the Indonesia Stock Exchange (IDX) outlined the landscape and capital market initiatives to support the SFI ecosystem, including the development of a green and sustainable index.

The event was organised with Perbanas and B20 as strategic partners, along with various other parties, to encourage sustainable domestic financial market deepening. On the same day, Bank Indonesia Senior Deputy Governor, Destry Damayanti, presented her opening remarks at a seminar entitled Building Resilient Sustainable Finance. Efforts to build resilient sustainable finance were discussed at the seminar, as part of the priority agenda of Indonesia’s G20 Presidency by overcoming the current challenges amid the risks associated with climate change.

Both events were organised as part of the fifth day of side events of the 2nd Finance and Central Bank Deputies Meeting (FCBD) and 1st Finance Ministers and Central Bank Governors Meeting (FMCBG) of Indonesia’s G20 Presidency, held 14-19th February 2022 in Jakarta.

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