Indonesia drafts Sustainable Finance Committee blueprint to close climate finance gap

Indonesia's Ministry of Finance, with OJK and Bank Indonesia, is operationalising a Sustainable Finance Committee under the P2SK Law to mobilise private green investment. With a climate funding gap exceeding USD 240 billion, the governance blueprint signals scaling approaches relevant to India's sustainable finance taxonomy development.

Indonesia's Ministry of Finance, with the Financial Services Authority (OJK) and Bank Indonesia, is operationalising the Sustainable Finance Committee (SFC) as mandated under the Law on Development and Strengthening of the Financial Sector (P2SK). A White Paper detailing the SFC's institutional architecture is being finalised by the Policy Centre for the Financial Sector, with support from the UK-based Green Finance Institute (GFI) and Climate Policy Initiative. The blueprint will guide the SFC in coordinating green finance strategies and aligning Indonesia's decarbonisation goals with economic development objectives.

ESG-aligned investors, financial institutions, ministries, and corporate actors are directly affected, as the SFC will coordinate across these to streamline project development and finance mobilisation. Indonesia faces a substantial shortfall: per the Ministry's Climate Budget Tagging Report covering 2018-2023, only IDR 702.9 trillion (approximately USD 46.9 billion) was allocated to climate expenditure, just 16.4% of estimated NDC funding needs, leaving a gap exceeding USD 240 billion. GFI's 2024 investor study identified barriers including unclear regulatory signals, underdeveloped platforms, and limited blended finance structures.

A key supporting regulation is currently being drafted by the government, and GFI's 2024 investor study recommendations are being integrated into the SFC design. Investors, policy analysts, and corporate actors should monitor the White Paper's finalisation and the SFC's operationalisation, which represents a crucial enabler for project viability and compliance assurance under Indonesia's emerging sustainable finance taxonomy. The SFC is expected to address governance gaps, reduce perceived risks, and attract sustainable finance at scale to bridge the climate finance gap.

Key figure — Climate finance gap: exceeding USD 240 billion; only 16.4% of NDC needs funded