Indonesia outlines a governance framework for its Sustainable Finance Committee to scale private capital flows and bridge the climate finance gap. ESG compliance and climate policy update take centre stage as ESG BROADCAST shares key takeaways.
Indonesia’s Ministry of Finance (MoF), in coordination with the Financial Services Authority (OJK) and Bank Indonesia, is moving ahead with plans to operationalise the Sustainable Finance Committee (SFC), as mandated under Law on the Development and Strengthening of the Financial Sector (P2SK). The initiative aims to strengthen environmental governance and unlock large-scale private investment to meet Indonesia’s climate targets. A key supporting regulation is currently being drafted by the government.
In a significant step forward, a White Paper detailing the institutional architecture and strategic roles of the SFC is being finalised by the Policy Centre for the Financial Sector (PKSK), with analytical and technical support from the UK-based Green Finance Institute (GFI) and the Climate Policy Initiative (CPI). The paper is designed to enhance investor confidence by laying down governance structures and identifying financial mechanisms for catalysing capital into low-carbon sectors. This governance blueprint will guide the SFC in coordinating green finance strategies and aligning Indonesia’s decarbonisation goals with economic development objectives.
Despite growing policy traction, Indonesia faces a substantial climate financing shortfall. As per the Ministry of Finance’s Climate Budget Tagging (CBT) Report covering 2018–2023, only IDR 702.9 trillion (approximately USD 46.9 billion) has been allocated to climate-related expenditure. This accounts for just 16.4% of the estimated funding required to fulfil Indonesia’s Nationally Determined Contributions (NDCs), leaving a funding gap exceeding USD 240 billion. “Public funds alone are insufficient. Scaling private capital mobilisation is essential to meet our climate goals,” stated Adi Budiarso, Head of PKSK.
The upcoming White Paper builds upon findings from GFI’s 2024 investor study, which identified barriers to green capital inflows in Indonesia. These include unclear regulatory signals, underdeveloped investment platforms, and limited blended finance structures. The report’s recommendations are being integrated into the SFC design to create a conducive environment for responsible business and long-term investment.
“Indonesia is laying the foundations for a green financial ecosystem. The SFC’s role in aligning regulations, pipelines, and incentives is central to this transition,” said Simon Horner, Managing Director of GFI. The SFC is expected to coordinate across ministries, financial institutions, and the private sector, acting as a central node to streamline project development and finance mobilisation.
Strategic significance lies in the SFC’s ability to systematically address governance gaps, reduce perceived risks, and attract sustainable finance at scale. For ESG-aligned investors, policy analysts, and corporate actors, the operationalisation of the SFC represents a crucial enabler for project viability and compliance assurance under Indonesia’s emerging sustainable finance taxonomy.
ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
