Transition finance has grown in importance in recent years as a means to enable transformation and decarbonisation of high-emitting industries for which low or zero-emission alternatives are not yet fully feasible. Transition finance is becoming increasingly relevant for Indonesia, where green finance alone cannot meet the financing needs associated with transforming high-emitting sectors. Transition finance is gaining traction internationally and being translated into clearer market guidance and increasing implementation, but credibility and environmental integrity remain central conditions for building market confidence and enabling scale.
This paper informs and supports the development of future policy efforts by the Indonesian Financial Services Authority (OJK) to promote transition finance in Indonesia. It reviews international policy and market developments and explores a range of financial instruments (including sustainability-linked and transition-labelled bonds, loans and funds). The paper also examines Indonesia’s policy and regulatory landscape, market readiness, current practices and the key challenges faced by financial institutions and issuers in mobilising transition finance. The analysis draws on a literature review, market data, international case studies, stakeholder interviews and a joint OECD-OJK survey of 118 Indonesian financial institutions and issuers operating in hard-to-abate sectors in Indonesia.
