ESG Disclosure and Regulatory Compliance: ESG BROADCAST shares key takeaways.
On February 12, 2026, the Financial Services Authority of Indonesia, known locally as Otoritas Jasa Keuangan (OJK), launched a public consultation on a draft regulation that will mandate sustainability reporting aligned with international standards. This move marks a significant shift in the nation’s corporate reporting landscape, moving away from fragmented disclosures toward a globally consistent framework. The draft regulation proposes the mandatory adoption of sustainability disclosure standards that are fully aligned with IFRS S1 and IFRS S2, which were issued by the International Sustainability Standards Board (ISSB) to serve as a global baseline for investor-grade environmental, social, and governance information.
The consultation period is set to conclude on March 13, 2026, with the OJK seeking feedback from financial sector business actors, issuers, and public companies. The proposed framework utilizes the National Sustainability Disclosure Standards, specifically PSPK 1 regarding general requirements and PSPK 2 focusing on climate-related disclosures. These local standards were ratified by the Institute of Indonesia Chartered Accountants (IAI) in July 2025 as a direct response to Indonesia’s commitment to the G20 Bali Leaders’ Declaration. By integrating these standards into the regulatory framework, the OJK aims to ensure that sustainability-related risks and opportunities are treated with the same level of importance as traditional financial reporting.
Implementation of the new mandate will follow a three-phase rollout strategy to allow for capacity building across different sectors. The first group, which includes issuers on the main and new economy boards, the stock exchange, and major commercial banks, must begin reporting for periods starting January 1, 2027. The second group, comprising development board issuers and smaller financial institutions, will follow in 2028. Finally, the third group, covering asset managers and special monitoring board issuers, is scheduled for 2029. This phased approach is designed to manage the technical burden on smaller entities while ensuring that the largest drivers of the Indonesian economy lead the transition toward greater transparency.
A critical component of the OJK’s proposal is the requirement for in-scope entities to develop and disclose detailed transition plans. These plans must outline how a company intends to manage its sustainability-related risks and achieve its long-term climate targets, providing investors with a clear roadmap of corporate resilience. Furthermore, the regulation mandates that sustainability reports must undergo independent third-party assurance. This requirement for external verification is intended to combat greenwashing and enhance the reliability of ESG data, ensuring that disclosures are not merely marketing exercises but are grounded in verifiable performance metrics and professional audit standards.
The strategic significance of this initiative lies in its potential to unlock international capital and strengthen Indonesia’s position in global supply chains. By adopting a “climate-first” approach that aligns with the ISSB baseline, Indonesia is providing global investors with the comparable and decision-useful data they require to assess the financial impacts of climate change. This regulatory alignment is expected to reduce the cost of capital for compliant firms and accelerate the development of the domestic sustainable finance ecosystem. Ultimately, the OJK’s roadmap ensures that Indonesia’s financial market remains competitive and resilient, paving the way for a transparent transition to a sustainable and inclusive economy.
Image Credit: The Jakarta Post
