Indonesia launches ESG framework for green, sustainable investment

As part of a series of initiatives during Indonesia’s G20 Presidency, on November 12 in Bali, Sri Mulyani Indrawati, Indonesia’s Minister of Finance, launched the Environmental, Social, and Governance (ESG) Framework and Manual, for government support and facilities in infrastructure financing. 

This initiative, the first ESG policy established by the Ministry of Finance in infrastructure financing, is a concrete deliverable related to sustainable infrastructure and quality infrastructure investments. 

The event was attended by the United Nations Development Program (UNDP), development partners including the Government of Canada, state owned enterprises under the Ministry of Finance, and the private sector. This year, with support from the UNDP and the Government of Canada (through a grant program managed by the World Bank), the event was organized by the Ministry of Finance in collaboration with PT Indonesia Infrastructure (PT IIF).

“The initiative also reflects the importance of sustainable, resilient, inclusive and transparent development in Indonesia, particularly in the area of infrastructure financing,” said Suminto Sastrosuwito, Director General of Budget Financing and Risk Management, Ministry of Finance, in his welcoming remarks. 

The adoption of ESG is expected to ensure that infrastructure provision could generate socio- economic positive impacts while minimizing potential risks (negative impacts) to environmental, social, and governance aspects, and IIF acted as the anchor for the implementation of the framework.

During the policy dialogue session with the Resident Representative of the UNDP Indonesia, Finance Minister Indrawati said the ESG policy will provide clear guidance for all stakeholders, particularly regarding the roles and actions that need to be taken to ensure that the infrastructure projects meet the ESG aspects. 

Indrawati said ESG will help stakeholders to comply with existing regulations and environmental standards, increase the positive impact of infrastructure development, open access to broader financing, and also increase public acceptance of the project construction.

ESG implementation will be carried out gradually until 2025 with the piloting phase starting in 2022 for the housing and water sector. A review of the initial implementation will be conducted to evaluate, obtain feedback, and identify opportunities for further implementation in the area of broader support instruments of infrastructure financing.

“The implementation of ESG is not only for once and ended there, yet it is the beginning of the journey that has to be refined towards green and sustainable finance as Indonesia’s commitment in one of the priority agendas in G20,” said Indrawati.

Photo credit: Lee Kok Leong. Press conference, November 12.

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