Cross-cutting analysis

Assessing the progress of Indonesia's financial institutions towards the clean energy transition



Indonesia has set ambitious goals to achieve a clean energy transition. In particular, the country aims to increase the share of renewables in its energy mix (23% by 2025) and reduce energy consumption across end-users (17% by 2025). Clean energy is also a key pillar of Indonesia’s National Determined Contributions (NDCs), aiming to reduce the country’s emissions by an unconditional 29% and conditional 41% compared to a business-as-usual scenario by 2030, accounting for more than a third of targeted emissions reduction by 2030.

While the country has made some progress, there is much to do to achieve these goals. Indeed, renewables represented around 11% of the energy mix in 2020 while progress in energy efficiency has deviated off the 17% target track as of late. Meanwhile, fossil fuels continue to dominate (OECD 2021a).


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Meeting climate ambitions will require a massive increase in private investment.  Achieving NDCs in the energy and transport sector, for instance, will require an estimated annual USD 23.6 billion to 2030 – more than 10 times the current clean energy investment level (MoF 2022). Given these needs, mobilising Indonesia’s financial sector and international capital flows will be crucial.

Accelerating sustainable finance can help achieve climate and clean energy goals

Aware of this challenge, Indonesia is already taking steps to develop and align its financial system with the Paris Agreement and Sustainable Development Goals. In 2015, Indonesia’s financial services authority (OJK) launched the Sustainable Finance Roadmap (Phase 2 of which started in 2021) in a bid to encourage the integration of environmental, social and governance considerations into investment/financing decisions and spur financial innovation for low-carbon opportunities. Following through, Indonesia also implemented key regulations (e.g. POJK 51 on sustainable finance and POJK60 on green bonds) and a range of capacity building activities.  It also recently released the Indonesia Green Taxonomy Edition 1.0.



Aside from financial system intervention, Indonesia has also implemented a number of key measures to achieve its climate objectives. Most notably, the country recently implemented a cap-and-tax system in the power sector as well as a coal phase-out policy to start in 2022 and end in 2056. Equally, PLN (the state-owned power utility) increased the share of renewables (albeit from a low base) in its planned capacity for the next 10 years (see OECD 2021b for more details). While key challenges remain, these measures are steps in the right direction and help reassert the country’s resolve to decarbonise its power sector and more generally achieve a low carbon transition.

Developing metrics and assessment tools can help track progress and increase evidence base

A number of policy barriers still remain, affecting the attractiveness and bankability of clean energy projects, while project developers often report that Indonesia’s financial institutions could do more to fund projects at affordable cost (as highlighted in OECD 2021a).

To shed light on these issues, OJK and the OECD – under the Clean Energy Finance and Investment Mobilisation Programme – undertook a comprehensive survey with a range of financial institutions, including banks, domestic institutional investors, financing companies, infrastructure finance institutions and other key financial players. The survey provides insights into the progress of Indonesia’s financial system in mainstreaming sustainable finance and financing the clean energy transition.


Survey: Sample and objectives

In light of Indonesia’s sustainable finance ambitions, this first-of-its-kind pilot survey was conducted to support OJK in designing and testing a range of key qualitative and quantitative indicators to measure financing flows to clean energy, fossil fuel and transport sectors as well as measure the progress of domestic financial institutions towards its sustainable finance goals.

The survey was built around two subsets of quantitative and qualitative indicators, administered in the form of questionnaires. The following tables present the survey samples:

Progress in Sustainable Finance Implementation

This section presents results of the qualitative questionnaire, which evaluates financial institutions’ progress in implementing sustainable finance. The first part of the analysis looks at measures and other actions that financial institutions have put in place to achieve OJK’s sustainable finance objectives; the second part focuses on financial institutions’ risk perception of renewable and energy efficiency projects.

Implementation of Sustainable Finance

Risk Perception of Renewable Energy and Energy Efficiency Projects

Key Take-Aways

Given the limited sample size, these take-aways should be interpreted with caution and are meant to provide preliminary insights:

  • Overall, the survey results indicate that respondents are taking actions to foster sustainable finance, although these remain tilted towards capacity building and awareness-raising activities. Still, numerous surveyed financial institutions indicated a continued lack of capacity to assess clean energy projects and thus comfort funding them. Moving forward, it will be important to shift efforts to implementation in order to deliver on the objectives of Phase 2 of the Sustainable Finance Roadmap by 2024.
  • Some of the surveyed banks and NBFIs appear to have made efforts to scale up sustainable finance e.g. through implementing SOPs or/and developing sustainable finance products. Given the recent announcement of Indonesia’s coal phase-out policy, reviewing the financial sector’s stance vis-à-vis coal could also be important to mitigate transition risks.
  • Nevertheless, the use of alternative financing schemes for sustainable projects remains overall limited, while some of the surveyed banks and NBFIs appeared bearish on the prospects for clean energy in Indonesia, mostly due to unconducive policy environment and lack of investment support. Hence, continuing to improve enabling conditions and the policy framework for clean energy will be important to bolster investor confidence and mobilise finance.
  • In order to accelerate the adoption of sustainable finance practices, further co-operation between financial institutions and the regulator is paramount, especially in improving policy design and implementation.


Financing the Clean Energy Transition: State of Play 

This section analyses results of the quantitative part of the pilot survey. In particular, it provides a snapshot of the state of play and key trends in energy and transport finance in Indonesia from a range of financial institutions over 2018-Q1 21.

Quantitative Questionnaire Results: Banks 

Quantitative Questionnaire Results: NBFI 1 

Key Take-Aways

Given the limited sample size, these take-aways should be interpreted with caution and are meant to provide preliminary insights:

  • Overall, as shown in the survey results, funds allocated (essentially by commercial banks and the infrastructure company) to renewable power projects have been on the rise over 2018-Q1 2021, although coal remained the single largest recipient of banks' power generation finance over the period.
  • Bank finance for solar and wind technologies remained dismal, particularly on a long-term, non-recourse basis. On the other hand, survey results seem to show such financing schemes were relatively available for other renewable technologies such as hydro (particularly, mini and micro) and bioenergy.
  • Quite surprisingly, surveyed KBMI 4 and 3 banks allocated a far lower share of their annual power generation loan disbursement to renewable projects than KBM 1 banks.
  • The relatively high share of loans allocated to on-shore wind projects by infrastructure financing company over that period, however, may suggest that efforts to catalyse investment for wind is underway.



This first-of-its-kind pilot survey provided a number of key lessons that can be useful to inform and support OJK’s efforts to develop metrics and performance indicators for sustainable finance. In particular:

  • While increasing sample size is critical to improve statistical robustness and allow for greater extrapolation of the results, it will also be important to prepare detailed guidelines and standardised protocols to help financial institutions provide more reliable, robust and consistent data and information (a key challenge of the pilot survey). 
  • These guidelines and protocols should adopt clear and detailed definitions of all metrics, indicators and sectors (beyond energy). The recently-released Green Taxonomy will be very helpful in this regards, classifying sectors using green-, yellow- and red-colour codes and thresholds.
  • Measuring energy efficiency finance flows proved particularly challenging to measure  as these are often not always consistently tracked and/or reported – and requires specific data collection methodology.
  • Additional quantitative metrics could also be developed. For example, this could include loan portfolio information, which would provide insights into the exposure of the financial system to green and non-green assets and thereby help gauge exposure to transition/climate risk. 


Ministry of Finance (2022), CGF Country Programme Document Indonesia: Buku Saku, Green Climate Fund Versi 0.2

OECD (2021a), Clean Energy Finance and Investment Policy Review of Indonesia, Green Finance and Investment, OECD Publishing, Paris.

OECD (2021b), RUPTL 2021-30: PLN steps up ambitions to accelerate clean energy investments in Indonesia

OJK (2017), Sustainable Finance Regulation No. 51/POJK.03/2017 on Application Of Sustainable Finance to Financial Services Institution, Issuer and Publicly Listed Companies

OJK (2017), OJK Regulation Number 60/POJK.04/2017 on The Issuance and The Terms of Green Bond

OJK (2018), Technical Guideline for Banks to implementation of POJK No. 51/POJK.03/2017

OJK (2021), Technical Guideline for Securities Companies of POJK No. 51/POJK.03/2017


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