Nusa Dua, 12 November 2022 -
As part of the Indonesia's G20 Presidency series, today on Saturday, 12 November 2022 in Bali, the Minister of Finance of Indonesia launched the Environmental, Social, and Governance (ESG) Framework and Manual for government support and facilities in infrastructure financing. This initiative is the first ESG policy established by the Ministry of Finance in infrastructure financing. The implementation of the ESG is a concrete deliverable of the infrastructure agenda of the Indonesian Presidency related to sustainable infrastructure and Quality Infrastructure Investments. This initiative marks the first ESG implementation policy set by the Ministry of Finance in infrastructure financing. The event was also attended by the United Nations Development Programme (UNDP), development partners including Government of Canada, State Owned Enterprises under the Ministry of Finance, and the private sector. The event was organized by the Ministry of Finance with the support from PT Indonesia Infrastructure (PT IIF).
This year, with support from the UNDP and the Government of Canada (through a grant program managed by the World Bank), the Ministry of Finance proudly developed the ESG Framework and Manual for government support management in infrastructure financing. "The initiative also reflects the importance of sustainable, resilient, inclusive and transparent development in Indonesia, particularly in the area of infrastructure financing," as emphasized by the Director General of Budget Financing and Risk Management, Ministry of Finance in his welcoming remarks. The adoption of ESG in the government support's business process is expected to ensure that infrastructure provision could generate socio- economic positive impacts while minimizing potential risks (negative impacts) to environmental, social, and governance aspects, and IIF acted as the anchor for the implementation of the framework.
In a Policy Dialogue session between the Minister of Finance and Resident Representative of the UNDP Indonesia, the Minister of Finance mentioned that the ESG policy will provide clear guidance for all stakeholders, particularly regarding the roles and actions that need to be taken to ensure that the infrastructure projects meet the ESG aspects. The Minister of Finance also elaborated on the benefits of implementing ESG in infrastructure project management. ESG will help stakeholders to comply with existing regulations and environmental standards, increase the positive impact of infrastructure development, open access to broader financing, and also increase public acceptance of the project construction.
ESG implementation will be carried out gradually until 2025 with the piloting phase starting in 2022 for the housing and water sector. A review of the initial implementation will be conducted as a venue to evaluate, obtain feedback, and identify opportunities for further implementation in the area of broader support instruments of infrastructure financing.
"The implementation of ESG is not only for once and ended there, yet it is the beginning of the journey that has to be refined towards green and sustainable finance as Indonesia's commitment in one of the priority agendas in G20," said Finance Minister.
As part of this event, PT IIF also signed a cooperation agreement with PT Angkasa Pura I (PT AP I). This agreement notably marked the role of PT IIF as ESG advisor to PT AP I in developing the ESG framework as part of the transformation of PT AP I. The signing of the agreement also indicates that the Ministry of Finance and its policy tools are firmly committed and set to implement ESG aspects in their business processes. Through IIF, the framework is promoted to be mainstreamed in various projects in many sectors through its advisory services.
The implementation of ESG policies in government support and facilities for infrastructure financing is a concrete action from the Ministry of Finance contributing to the achievement of the sustainable development agenda and climate change targets. This ESG policy needs to be seen as an opportunity to optimize the benefits of infrastructure development and increase broader access to private financing. The preparation of this ESG resulted from solid cooperation between the Ministry of Finance and multilateral institutions and SOEs under the Ministry of Finance as an Implementer of the PPP Project Development Facility. It is the commitment of the Ministry of Finance to continually consider environmental, social, and good governance aspects in infrastructure investment.
