{"id":8113,"date":"2025-10-09T11:18:00","date_gmt":"2025-10-09T04:18:00","guid":{"rendered":"https:\/\/irid.or.id\/?p=8113"},"modified":"2026-06-17T11:29:12","modified_gmt":"2026-06-17T04:29:12","slug":"strengthening-the-role-of-financial-sector-and-capital-market-to-ensure-just-climate-transition-in-indonesia","status":"publish","type":"post","link":"https:\/\/irid.or.id\/en\/strengthening-the-role-of-financial-sector-and-capital-market-to-ensure-just-climate-transition-in-indonesia\/","title":{"rendered":"Strengthening the Role of Financial Sector and Capital Market to Ensure Just Climate Transition in Indonesia"},"content":{"rendered":"
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Indonesia\u2019s Golden Vision 2045 has set ambitious climate and development goals. For instance, Indonesia aims to cut greenhouse gas (GHG) emissions by 32% by 2030 through renewable energy and carbon trading, as part of its Net Zero Emission (NZE) 2060 strategy. Indonesia\u2019s Ministry of National Development Planning (BAPPENAS) estimates <\/span>Indonesia\u2019s overall sustainable development financing gap, including climate, adaptation, biodiversity, and social protection, to be around USD 1.7 trillion<\/span>. <\/span>Indonesia\u2019s Ministry of Energy and Mineral Resources (MEMR)<\/span><\/a> indicated that <\/span>accelerating the energy transition requires up to $1 trillion USD until 2060<\/span>. This estimate has not yet included the costs of socio-economic impacts and the transition to renewable energy. In addition, the <\/span>Just Energy Transition Partnership (JETP) Indonesia Secretariat<\/span><\/a> has estimated the energy transition cost for the electricity sector alone at USD 97.3 billion by 2030. However, the number does not yet cover the financial needs for the just transition intervention.\u00a0<\/span><\/p>

Given that public finance covers only a fraction of Indonesia\u2019s climate financing needs, the role of the financial sector becomes crucial in bridging the financing gap. Delivering Indonesia’s climate goal requires a large-scale and sustained investment. Hence, positioning the private sector as the primary engine for capital, innovation, and implementation. In this regard, the private sector can play a key role in mobilizing capital, driving technological advancement, and participating in new green markets.<\/span><\/p>

Indonesia\u2019s climate ambition, as reflected in its commitment to net-zero emissions and low-carbon development, finds strong resonance in the Financial Omnibus Law, which serves as a catalyst for shifting the financial sector toward low carbon and sustainable investments. By mandating the integration of sustainability across banking, capital markets, and non-bank financial institutions, the law ensures that financial flows are directed toward renewable energy, climate-resilient infrastructure, and sustainable enterprises. Crucially, this transformation is designed to incorporate the principles of a just transition\u2014balancing decarbonization with social equity by safeguarding jobs, supporting small and medium enterprises (SMEs), and ensuring vulnerable communities are not left behind. In this way, the greening of the financial system under the Omnibus Law framework does more than mitigate systemic climate risks: it enables inclusive economic transformation, aligning Indonesia\u2019s financial stability with its broader climate and social development agenda.\u00a0<\/span><\/p>

The Place-Based Just Transitions report<\/span><\/a> offers a policy baseline for Indonesia, mapping existing policy architecture, financing mechanisms, and social protection systems. <\/span>The report<\/span> identifies critical enablers and gaps for the financial sector in ensuring that transition pathways are people-centered, locally relevant, and financially viable.<\/span> Included in the report is the\u00a0 opportunity for Indonesia\u2019s financial sector\u2014with its Golden Vision 2045\u2014to shift the investment away from fossil fuel and prioritize community-centered economic diversification. The report also provides an <\/span>entry point to integrate just transition into investment decision-making by the asset managers<\/span>.\u00a0<\/span><\/p>

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In this context, Directorate of Banking, Financial Markets, and Other Financing Development of the Ministry of Finance of the Republic of Indonesia, in collaboration with Indonesia Research Institute for Decarbonization (IRID) and the Asia Investor Group on Climate Change (AIGCC), have convened a multi-stakeholders roundtable to explore the role of the financial sector in Indonesia to integrate the just transition principles into Indonesia\u2019s low greenhouse gas emission and resilient development strategies, as well as exploring possible financing instruments for just climate transition, drawing on findings from AIGCC\u2019s Place-Based Just Transitions: Policy Baseline & Case Studies report. The discussion aims to explore how investors, particularly the private sector, can support financing models that explicitly link climate goals with social equity outcomes. This involves identifying the necessary ecosystem to attract capital for just transition programs and activities, including at the sub-national level.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Download this Discussion Paper to learn more information.<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Indonesia\u2019s Golden Vision 2045 has set ambitious climate and development goals. For instance, Indonesia aims to cut greenhouse gas (GHG) emissions by<\/p>\n

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