Indonesia is preparing to ease regulatory hurdles to draw more foreign investors and banks into emissions-cutting initiatives (28/11).

A forthcoming white paper details new steps to mobilize private capital critical to Indonesia’s climate ambitions.

Sustainable Finance Committee to Align Fragmented Rules

Authorities have finalised the governance structure and implementation plan for a national body that will align Indonesia’s scattered regulatory frameworks and policies.

The Sustainable Finance Committee is expected to have around 20 members from the Finance Ministry, the Financial Services Authority, and Bank Indonesia.

The Finance Ministry will lead the committee as coordinator.

Signed into law in 2023, the body is expected to confirm its members in the first quarter of 2026, supported by a secretariat and several working groups.

Investors Request Stronger and Clearer Institutions

The committee is designed to help foreign investors understand regulations, incentives, project pipelines, and risk-reduction tools.

Mr. Simon Horner, managing director for external affairs at the Green Finance Institute, said: “Investors tell us they need stronger, more credible, more transparent institutions to commit capital to the Indonesian market.”

He added: “They don’t always understand how the political system works, the role of the domestic development finance institution, the involvement of state-owned banks in transactions.”

Climate Plan Highlights Major Funding Needs

Indonesia’s latest nationally determined contribution submitted to the United Nations in October projects emissions will peak in 2030 under two main economic growth scenarios.

As with other emerging economies, Indonesia has limited fiscal space and faces difficulty attracting capital from developed markets.

The climate plan states the country needs at least US$472.6 billion in investment to reach its climate targets.

From 2018 to 2023, the government spent 702.9 trillion rupiah (S$55 billion) on climate-related efforts, according to the Finance Ministry.

The Just Energy Transition Partnership, a US$20 billion commitment from wealthy nations to help close coal plants and expand clean energy, has produced about US$3 billion in approved financing and four supported projects.

The United States withdrew from the partnership in March.

Government Sets 2035 Renewable Energy Target

President Prabowo Subianto has set a national goal for Indonesia, which relies heavily on coal, to fully shift to renewable energy by 2035.

The government has also identified six key sectors, including food, water, energy, and health, as national adaptation priorities as the US$1.4 trillion economy faces rising risks from extreme rainfall, droughts, and heat waves.

PHOTO: FREEPIK

This article was created with AI assistance.