Towards a sustainable finance system in Indonesia
Posted on 03 July 2023
In order to maintain global financial and monetary stability, it is increasingly acknowledged that governments, central banks and financial supervisory and regulatory authorities working on climate risk issues need to widen their focus and encompass broader environment- and nature-related risks such as biodiversity loss.
According to the Indonesian Biodiversity Strategy and Action Plan (IBSAP, 2015), Indonesia is a country blessed with unique and rich biodiversity that serves as the backbone for the lives of hundreds of ethnic groups within the country’s territory. Planning biodiversity management as an asset to sustainable development should be an important part of this. On the other hand, Indonesia is also recognized as a particularly vulnerable country to climate change where biodiversity management is essential to help increase the country’s resilience towards climate change. Building on these considerations, on June 20-22, a 3-day workshop took place in Jakarta, aimed to enhance awareness on the importance of the implications of biodiversity loss and how it is interlinked with climate change, and to inform about the latest developments taken by central banks and supervisors to manage these risks within the core-mandates.
The Workshop “Natural Capital, Biodiversity and The Economy and How it Relates to the Financial System; and Climate/Nature Scenario Analysis and Stress Testing” jointly organized by Bank Indonesia Institute, WWF Indonesia supported by WWF International Greening Financial Regulation Initiative and WWF Singapore, and the ASEAN +3 Macroeconomic Research Office (AMRO), brought several people from the Bank Indonesia, the Bank Indonesia Institute, OJK, the Ministry of Finance and other organizations together to discuss these topics. The workshop counted on various contributions and insights from AMRO, LSE Grantham Research Institute on Climate Change and the Environment, The International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE), S&P Global, RMI, 1in1000, Robeco and OJK and WWF.
@WWF/Bank of Indonesia
@WWF/Bank of Indonesia
Key takeaways from this workshop include, among others:
(a) the need for a centralised, credible and open-source environmental database that compiles useful data to inform decision making. Such a database could be developed from corporate disclosures as well as data integration from various data owners;
(b) that climate scenario analysis and other assessment tools designed for central banks, regulators and financial institutions need to be augmented to gauge the significance of climate and nature risks on the financial health of both individual institutions and the overall financial system, while also better reflecting local context and priorities of the country and its regions;
(c) the importance of hands-on environmental analytical tools and methodologies that central banks, financial supervisors and financial institutions can apply in a harmonised manner; and
(d) coordination amongst financial and non-financial stakeholders is needed to fully integrate actions taken by central banks and financial supervisors, ministries and government agencies as well as private sector players.
More information, contact: Rizkia Sari Yudawinata, Sustainable Finance Program Lead, WWF-Indonesia. Email at rjoedawinata@wwf.id