Mari Pangestu also explained, that there are several challenges in advancing green financing,
including economic and financial barriers, such as limited fiscal capacity, budgetary priorities on
fossil fuel subsidies, low credit ratings, and high costs of capital.
 

"Stakeholders also face technical and knowledge-based barriers such as a lack of supporting
regulatory environment, a shortage of relevant capacity, and insufficient data and the absence of a
standardization for green financing. Addressing these obstacles requires a concerted effort from
all stakeholders involved.” explained Mari Pangestu.
 

In this discussion, the speakers included Mari Elka Pangestu, Chair of the Green Investment
Principles ASEAN Chapter; Bill Winters, Chief Executive Officer (CEO) of Standard Chartered
Bank; Guillame de Gantes, Senior Partner at McKinsey & Company; Henry Rialdi, Head of the
Surveillance and Integrated Financial Sector Policy Department at the Financial Services
Authority (OJK); Shinta W. Kamdani from Coordinating Vice Chairwoman for Maritime,
Investment, and Foreign Affairs Indonesian Chamber of Commerce and Industry (Kadin
Indonesia); and Ma Jun, Chairman of the China Green Finance Committee and GIP Co-chair, who
participated virtually. The discussion was moderated by Rino Donosepoetro, Co-chair of the Green
Investment Principles ASEAN Chapter, and Yose Rizal Damuri, Executive Director of CSIS
Indonesia. The participants consisted of stakeholders from the government, financial institutions,
and the private sector.

 

Key Points from Speakers:
Mari Elka Pangestu - Chair Green Investment Principles ASEAN Chapter
- Investors and stakeholders are increasingly focusing on strategies to address the climate
crisis. The primary goal is to tackle challenges and seize opportunities in advancing green
financing, while also encouraging collaboration between government and private sectors.
- ASEAN plays a crucial role in energy transition and decarbonization, accounting for 70%
of global coal consumption and production. This region faces a significant green
financing gap, estimated at USD 4 trillion. To facilitate energy transition, it is essential
that 34% of the necessary funding comes from government budgets, with the remainder
sourced from private investments.
- Addressing fuel and coal subsidies is politically sensitive but necessary to be addressed.
There is a need for more targeted policies to manage these subsidies effectively.
- The Green Investment Principles (GIP), initiated by the G20 sustainable finance working
group and led by Dr. Ma Jun, aim to uphold principles established by the G20.
- In closing, it is crucial to address legacy issues to avoid a slow energy transition. Learning
from global experiences can provide valuable insights for shaping Indonesia's regulatory
framework.

 

Bill Winters - Chief Executive (CEO) Standard Chartered Bank
- Despite the availability of funds, there is a shortage of green projects to utilize this capital
effectively. To address this, substantial investment is required in new technologies and
energy sources.

- For funds to be effectively absorbed, it is crucial to direct investments to appropriate
projects. A supportive legal framework is essential, although it may take time to develop.
This framework must align with global market needs while accommodating local
regulations.
- Currently, there is no recognized global price for carbon emissions, which complicates the
global carbon marketplace. To address these challenges, there is a need for catalysts to test
and integrate innovative solutions into the financial system and industry, encouraging
exploration of new areas.

 

Guillame de Gantes - Senior Partner, McKinsey & Company
- 75 percent of investment in green projects comes from the private sector, underscoring the
difficulty of linking the financial sector with the real economy. Green projects are
inherently riskier than traditional ones due to uncertainties in technology and cash flow.
- Feedback from clients across ASEAN shows that while progress is being made in
harmonizing taxonomies, data reliability remains problematic. Low-quality data and
unexpected issues have led to unclear commitments.
- Recent advancements in climate risk testing offer a solid foundation for stress testing.
However, derisking remains challenging, especially in maintaining cash flow and
managing currency risks. For example, the USA and Brazil use currency swaps to mitigate
these risks, a strategy Indonesia might consider for its long-term green finance investments.
- Small and medium-sized enterprises (SMEs) face higher risks with green projects,
necessitating greater industry coordination to support these ventures.

 

Henry Rialdi – Head of Surveillance and Integrated Financial Services Sector Policy
Department, OJK
- Since 2015, significant efforts have been made in sustainability, including the development
of guidelines for businesses and the financial sector. Regulations have been issued
concerning sustainability reports, green bonds, and emission taxonomy.
- The first version of the taxonomy covered multiple sectors and has since been adjusted to
better align with government targets, contrasting sectors based on Nationally Determined
Contributions (NDCs) and incorporating considerations for different company sizes
(MSMEs and large firms).
- Before establishing carbon markets, green bond regulations were revised to emphasize
sustainability beyond just being "green." Social principles have also been integrated into
ESG regulations, broadening the focus beyond environmental issues.
- The taxonomy aims to be applicable to Indonesia while remaining interoperable with
international frameworks. However, there are challenges due to the strong influence of
Western ESG paradigms and skepticism about credibility in Indonesia.
- The financial sector has yet to fully converge with the real sector in the sustainability
ecosystem. Entering the sustainability space incurs higher costs, and creating effective
incentives within the financial sector remains challenging.

 

- Awareness and Knowledge: According to an APINDO survey of 2,000 companies, only
36% are aware of ESG principles, and green financing remains a relatively unknown
concept. Additionally, 16% of companies have not yet produced a sustainability report,
indicating a significant gap in green financing understanding.
- Market Enablers: Although investors are interested in green projects, the available
options are still limited. The cost of adapting business practices to align with ESG
principles involves adjustments in financing, work culture, and more.
- Incentives and Financing: Market incentives and disincentives for green financing are
insufficient. Financing remains limited, and there is no significant incentive to cover the
associated costs. While blended finance presents a promising solution, its implementation
is complex.
- Carbon Market and Taxonomy: The OJK's taxonomy for sustainable finance presents
opportunities for green financing across five sectors. However, there are gaps in policy and
regulatory simplification that need addressing. Public-private coordination is crucial to
bridging these gaps and aligning fiscal policy with energy and environmental objectives.
- The investment gap remains a significant challenge, particularly in developing countries.
To address this, it is essential to encourage collaboration among stakeholders and to
increase commitments towards identifying sustainable investment opportunities.
Additionally, improving ESG reporting practices is crucial for advancing these efforts.