Indonesian Banks to Push Sustainable Lending to Over $56 Billion
(Bloomberg) -- Sustainable financing in Indonesia, the world’s largest exporter of thermal coal, is set to increase with half the banking industry pledging to boost funding for environmentally-friendly projects, according to the financial services authority.
Indonesian banks recorded a combined total of $55.9 billion in sustainable financing as of November last year, said the financial regulator known as OJK. The lenders that made the pledge control 91% of the country’s total banking assets, the agency said in a statement Tuesday.
The shift in lenders’ attitude toward more sustainable financing is in line with the government’s new renewable policy incentives to cut emissions by 29% in 10 years. It also came as the nation follows Singapore to become the second Southeast Asian country to impose a levy on carbon emissions.
In addition, there are as much as $3 trillion worth of projects that could potentially be financed under a new green investment framework being developed by the ASEAN group of nations, of which Indonesia is a member.
A slew of Indonesian companies have announced plans to develop sustainable projects. State power firm PT Perusahaan Listrik Negara said Tuesday it will sell both green and sustainable bonds to help finance some $500 billion projects slated for the next 40 years developing renewable energy sources and to retire its coal-fired plants. Coal miner PT Indika Energy will invest $1 billion in non-coal businesses over the next 5 years. PT TBS Energi Utama also plans up to $500 million investments in green energy projects.
Domestic green bond issuance accounts for only 0.01% of total outstanding amount, compared with some $2.2 billion in green notes issued globally by Indonesian listed companies, according to OJK. To support issuance, OJK plans to introduce green taxonomy measures early next year that will offer guidance and principles for sustainable financing.
Some banks said they expect to reduce loans to new coal mines and fund more environmentally friendly projects.
“We will only maintain what we have in coal and will be more aggressive in pushing for sustainable financing,” PT Bank Negara Indonesia President Director Royke Tumilaar said in an interview.
PT Bank Rakyat Indonesia, the first Southeast Asian Bank to issue a sustainability bond, has 65.3% of total loans financing sustainable business activities, according to its website. Lending to sustainable sector rose 9.1% to 607.7 trillion rupiah ($42 billion) in the first nine months of the year. PT Bank Mandiri, which raised $300 million from its first green bond earlier this year, recorded 187.4 trillion rupiah loans in its sustainable portfolio as of September, or 23% of total loans.
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