The ratification of the Paris Agreement through Law No. 16 of 2016, places a binding obligation on all signatory countries, including Indonesia, to communicate their commitments to reducing greenhouse gas (GHG) emissions. In line with its Nationally Determined Contribution (NDC) document, Indonesia has pledged to reduce GHG emissions by 29% relative to the business-as-usual (BAU) scenario, and up to 41% with international support. To support this national commitment, the Financial Services Authority (OJK) has established a sustainable finance framework, as outlined in its Sustainable Finance Roadmap.

 

One of the key outcomes of the implementation of the Sustainable Finance Roadmap Phase I (2015–2019) was the issuance of Financial Services Authority Regulation (POJK) No. 51/POJK.03/2017 on the implementation of sustainable finance for Financial Services Institutions (FSIs), Issuers, and Public Companies. Building on this progress, OJK launched Sustainable Finance Roadmap Phase II (2021–2025), which identifies several strategic priorities including the development of a Green Taxonomy.  

 

The Green Taxonomy is a classification system for economic activities that contribute to environmental protection and management, as well as climate change mitigation and adaptation. By establishing clear and measurable criteria, the Green Taxonomy Indonesia (GTI) enables the transparent and consistent classification of green economic activities across various sectors and sub-sectors. This clarity helps prevent the practice of greenwashing and ensures that sustainability claims are credible and aligned with national and international environmental objectives.  

 

In February 2022, the first edition of the Green Taxonomy Indonesia (GTI) was officially launched by the President of the Republic of Indonesia. This launch served as a demonstration of support for Indonesia’s role as the G20 Presidency that year, as well as a reflection of the Financial Services Authority’s (OJK) commitment to advancing the green economy. The GTI is expected to serve two key purposes: (1) As a basis for formulating incentive and disincentive policies by various ministries and government agencies, including OJK; and (2) As a guideline for disclosure, risk management, and the development of innovative sustainable financial products and/or services for Financial Services Institutions (FSIs) and Issuers.  

 

Globally, several countries and regions have developed taxonomies to promote sustainable financing, including the ASEAN region. In 2021, the ASEAN Taxonomy Board (ATB) released Version 1 of the ASEAN Taxonomy for Sustainable Finance (ATSF), which introduced a multi-tier conceptual framework consisting of two main elements: the Foundation Framework, which outlines general principles for assessing the sustainability of economic activities, and the Plus Standard, which provides more detailed criteria known as Technical Screening Criteria (TSC).  

 

In 2023, ATB published Version 2 of the ATSF, enhancing the Foundation Framework with decision trees and guiding questions for each environmental objective, and expanding the Plus Standard with TSC development for the first focus sector—energy. ATSF Version 2 also emphasizes the importance of social aspects in the taxonomy, introducing three essential criteria: Do No Significant Harm (DNSH), Remedial Measures to Transition (RMT), and Social Aspect (SA). The ATSF serves as a key reference in the ongoing development and refinement of Indonesia’s Green Taxonomy.  

 

The development of Indonesia’s Green Taxonomy remains an ongoing journey aimed at strengthening sustainable finance in the country. Stay tuned for further updates on Indonesia’s Sustainable Finance Taxonomy. 
#BCAforSustainability  

 

Source: Adapted from various sources.