KLH and BI urge Banking Sector to support Green Economy - Bank Sentral Republik Indonesia
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May 23, 2019
No. 15 / 24 / DKom

On 21st August 2013 at Bank Indonesia, the Ministry for the Environment (KLH) in conjunction with Bank Indonesia (BI) held a Media Briefing entitled The Role of the Banking Sector in developing a Green Economy. The media briefing was launched by the Deputy Governor of Bank Indonesia, Mr Ronald Waas, and closed by the Secretary of the Ministry for the Environment, Ms Hermien Roosita. Speakers from a number of related institutions attended the media briefing. Imam Hendargo (Deputy of Environmental Governance, KLH) presented material on environmentally friendly banking as an economic instrument, while Irwan Lubis (Executive Director of the Department of Banking Education and Regulation, Bank Indonesia) raised the topic of environmentally friendly banking policy. In attendance from the banking community, Ms Felia Salim (Vice President Director of Bank BNI) shared her experiences regarding the application of environmentally friendly banking. Furthermore, Raymond Bona (Deputy Chief of Party ICED-US AID) elaborated on the application of green banking in several countries.

"Act No. 32 of 2009 concerning environmental protection and management requires all economic activities to comply with and promote environmental sustainability. Banks, as part of a greater business entity, are clearly also involved with such environmental considerations. Neglecting environmental responsibilities has the potential to exacerbate credit risk, legal risk and reputational risk at banks. Therefore, banks are required to understand and become proficient in environmental risk management," stated the Deputy Governor of Bank Indonesia, Ronald Waas in his opening address.

Deputy Minister for the Environment, Imam Hendargo, explained that the nation of Indonesia represents a ring of renewable energy or indeed an energy belt. In addition to oil and natural gas, hydropower, geothermal power, solar, wind, sea currents and wave power, biomass and biofuels are all present in Indonesia. "Efforts to establish green energy as a foundation would help the actual realization of a Green Economy," added Iman.

Issues of equal importance are linked to food and energy security. Those two sectors contribute significantly to the economy, particularly because the value of imports is so high, commodity prices fluctuate (affecting inflation), and there are pressures on the exchange rate as well as a deficit in Indonesia’s balance of payments. Ronald Waas emphasized that support from the banking community was critical to fund both sectors. Environmentally friendly financing to the energy and agricultural sectors (green financing) is expected to not only secure food and energy self-sufficiency but also contribute to easing other green economy problems like reducing greenhouse gases, to which Indonesia is committed in the eyes of the international community.

The basic principles of green banking comprise efforts to strengthen the capacity of bank risk management, especially that linked to the environment, and encourage banks to expand their portfolio of green financing through renewable energy, energy efficiency, organic agriculture, eco-tourism, environmentally friendly transportation and a variety of eco-label products. These are the limits of bank awareness regarding the possibility of environmental problems in bank-funded projects that could adversely affect credit quality and the reputation of the bank involved. Utilising a more macro and longer-term framework, Bank Indonesia expects green banking to contribute propitiously to efforts implemented in order to strengthen monetary and fiscal policy, among others, reflected by a reduction in the reliance on oil imports and imported agricultural produce due to additional domestic energy supply stemming from renewable sources, efficiency gains in terms of energy use by the manufacturing industry, and a proliferation of organic agriculture all supported by the national banking industry. On the other hand, such measures will ensure the banks bolster government commitment to improve Indonesia’s standing as the lungs of the earth by reducing greenhouse emissions.

By advocating such policy, the Ministry for the Environment (KLH) engages in intense coordination and cooperation in conjunction with Bank Indonesia (BI). Close coordination and cooperation is achieved through a Memorandum of Understanding that has already been extended twice. The scope of the Memorandum of Understanding includes:

  1. Synchronising and harmonising the legislative provisions required in accordance with the tasks and authority of each respective institution, in order to expand the banks’ role in protecting and managing the environment.
  2. Providing information concerning regulations, policies, guidelines, criteria, standards and assessments as well as the environmental performance of firms required in order to conduct educational and socialisation activities with the banking sector and further research the necessary guidelines and regulations.
  3. Organising educational and socialisation activities concerning environmental protection and management for the banking community.
  4. Implementing joint research in order to formulate guidelines and regulations for banks considering environmentally friendly concepts.

For more detailed information please contact:

  • Rosa Vivien Ratnawati, Director of Public Relations and Legal Affairs, Ministry for the Environment, Tlp/Fax: 021-8517182, Email: humaslh@gmail.com / www.menlh.go.id
  • Difi A. Johansyah, Director of Communications, Bank Indonesia, Tlp/Fax: 021-29817317 email: humasbi@bi.go.id
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