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Trends in sustainability: Exploring financing opportunities in Indonesia
Despite setbacks, sustainability initiatives will likely continue, driven by investor and consumer pressure which put environmental, social,and governance (ESG) concerns as priority, and long-term economic benefits like energy efficiency and renewable energy sources continue to be proven cost-effective, thus making sustainability initiatives attractive.
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A clerk poses with US dollar banknotes on May 2, 2024, at a money changer in Jakarta. (AFP/Adek Berry)
T
he sustainability sphere is currently grappling with numerous challenges, and the outlook remains precarious, particularly in the coming years. Key factors such as geopolitical disruptions, evolving policy frameworks and escalating climate change risks pose significant challenges for global companies. Despite the continued trust of investors, industries, firms and regulators in the potential of sustainability as a commercial driver, the environment has become increasingly complex. This complexity manifests in the heightened likelihood of trade wars, which could disrupt supply chains and necessitate policy changes that exacerbate volatility.
It is highly probable that the global sustainability condition will undergo a significant shift during United States President Donald Trump’s second term. This potential reversal of various environmental regulations could mirror the actions taken during his first term. This may include deregulation of current emissions standards, fossil fuel production regulations and environmental reporting requirements. Furthermore, there is a possibility of increasing fossil fuel investment with additional funding for the oil, gas and coal industries, potentially at the expense of renewable energy sources. Additionally, withdrawal from climate commitments such as the Paris Agreement could further contribute to the volatility in the sustainability agenda.
Despite these setbacks, sustainability initiatives will likely continue to be driven by investor and consumer pressure which put environmental, social and governance (ESG) concerns as priority, and long-term economic benefits as energy efficiency and renewable energy sources continue to be proven cost-effective, thus making sustainability initiatives attractive.
Contrary to expectations, the European Union, a global leader in environmental regulations, is actively advocating for a reduction in ESG reporting requirements, prioritizing energy security and adjusting trade policies. If the EU were to relax its regulations while the US were to withdraw climate policies, global corporations may adjust their investments accordingly.
Despite policy changes, companies will continue investing in sustainability because of the mandate of decarbonization, consumer demand for environmentally friendly products and community engagement. Industries recognize that reducing emissions remains crucial for resilience, particularly in global markets subject to stringent regulations. Additionally, consumers increasingly demand sustainable products, and companies are reluctant to fall behind competitors in this area.
According to Environmental Finance Data (EFData), the market value of sustainable bonds has reached US$4.95 trillion as of the end of February 2025. In 2024, cumulative issuance of green, sustainability and sustainability-linked (GSS+) bonds totaled $1.04 trillion while GSS+ loans amounted to $559.53 billion. However, we also observe a declining sustainability financing issuance from $509.8 billion in Q1-2024 to $300.9 billion in Q4-2024.
Despite the dominance of Europe and Asia in the sustainable finance market in 2024, emerging markets (EM) only accounted for 21 percent of GSS+ issued and 13 percent of GSS+ loans. Notably, in ASEAN, sustainable loans are gaining greater traction than bonds, with loans comprising 45 percent of the total sustainable financing market.
