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Indonesia, with ICAEW and UNDP, prioritizes funding for energy transition
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he Finance Ministry, in collaboration with the Institute of Chartered Accountants in England and Wales (ICAEW) and the United Nations Development Program (UNDP), held an online conference on Wednesday.
The event, titled “Indonesia International Conference for Sustainable Finance and Economy 2022: Sustainable Finance Toward a Transition to Net-Zero Emissions”, is expected to review policies and efforts to build a stronger Indonesian financial sector by accelerating the transition to sustainable finance in the country. The agenda is in line with the Paris Agreement, which Indonesia is party to.
The country has been making progress its own way, including taking the first steps toward implementing sustainable financing, which were carried out through the launch of the Energy Transition Mechanism (ETM) Country Platform at the last Group of 20 side event. The ETM Country Platform will facilitate the country’s coordinating efforts to transition to cleaner energy.
“Indonesia has taken real action by launching our Energy Transition Mechanism Country Platform. This is a very important milestone in designing a just and affordable energy transition for Indonesia. This CF shows that we, Indonesia, are prepared to mobilize large financial resources in the energy industry to produce dependable and inexpensive energy to sustain our robust economic growth,” said Finance Minister Sri Mulyani Indrawati.
She elaborated that the platform would be utilized to bring in funding for climate change from private and public institutions. It would also generate valuable lessons for the global community in implementing better energy transition policies and create institutional and regulatory readiness for Indonesia to attract new and significant investment in its energy sector as the country simultaneously strives to reduce greenhouse gas emissions.
Sri Mulyani added that it was up to the government to set up the legal framework and infrastructure to help Indonesia’s ESG market develop and that therefore, the platform was expected to help produce quality and affordable energy for inclusive sustainable development to achieve the net-zero emissions target for the country.
Sri Mulyani continued that the government was currently trying to reform the omnibus law to further facilitate the development of the ESG market.
“ICAEW’s vision is that chartered accountants enable the world of sustainable economies, with one of our strategic themes [being] to help to achieve the UN Sustainable Development Goals. With current economic challenges and instability, and the resulting pressure of anxiety for business, it can be very easy to lose sight of the importance of the sustainability agenda and the road to net zero. But it’s critical that we maintain momentum and don't lose sight of the impact we can and must make,” said Michael Izza, chief executive of ICAEW.
In September 2022, the Indonesian government issued a Nationally Determined Contribution (NDC), a revision to what was previously determined in the Paris Agreement. The NDC outlines that the country is committed to reducing emissions by 43.2 percent by 2030. To achieve this target, Indonesia’s ETM Country Platform will utilize a mixed financial approach, as well as international support in accelerating the transition from fossil fuels to environmentally friendly energy.
“When it comes to innovative financing for SDGs and the climate crisis, I think we all agree that Indonesia has proven itself to be a pioneer. Indonesia was the first country in the world to have issued green sukuk [Sharia-compliant bonds] in 2018 and the first in ASEAN country to issue green SDG bonds in 2021. This instrument has raised more than US$6.3 billion and the funds have been used to finance green and social projects, in which UNDP is honored to be the key development partner in this undertaking,” said Muhammad Didi Hardiana, head of the innovative financing lab at UNDP Indonesia.
He further stated that UNDP Indonesia was hoping to develop a new direction for aligning and engaging sustainable finance more productively for inclusive climate mitigation and adaptation. He also hoped that sustainable finance would make a real contribution to achieving the SDGs in Indonesia.
To ensure the success of the ETM Country Platform, the government and other supporting organizations will also need to foster collaborative efforts with those in the mining and fossil energy sectors, as well as stakeholders in other industry sectors. Moreover, stakeholders should focus on three main things: funding for the cessation of operational high-emission power plants toward renewable energy, funding for the development of new renewable energy and human resources in an inclusive energy transition.
“In 2020, we’ve become the first major professional body in the world to become carbon neutral. A master achievement which we hope inspires others to do the same. Through our own work, and through continuing to collaborate with the Finance Ministry and UNDP and others, we will help to meet the Indonesian and the global transition to a greener economy and more sustainable future,” Michael concluded.
