National Banks Are Not Serious In Pushing For Decarbonization Efforts

Illustration of ATMs of state-owned banks in Himbara (Photo: ANTARA)

JAKARTA - The push for green financing by national banks is considered insufficient if it is not balanced by decarbonization efforts, namely by stopping financing for the coal industry.

The #CleanBankmu program encourages banks to immediately clean their portfolios of coal because it is an emission-producing industry that contributes greatly to the climate crisis.

Senior Analyst of the Climate Policy Initiative, Luthfyana Larasati explained, state-owned banks have become part of the drivers of sustainable finance.

Based on the Financial Services Authority (OJK) Regulation Number 51/POJK.03/2017 concerning the Implementation of Sustainable Finance for Financial Services Institutions, Issuers and Public Companies, there are 12 categories of sustainable business activities, of which 11 activities are included in the green criteria, and 1 is included in the green criteria. social criteria, namely MSME funding.

Eleven activities are included in the sustainability aspect, such as renewable energy, energy efficiency, pollution prevention and control, management of living natural resources and sustainable land use, and conservation of terrestrial and aquatic biodiversity.

Furthermore, environmentally friendly transportation, sustainable water and waste water management, climate change adaptation, sustainable water and wastewater management, environmentally friendly buildings that meet national, regional or international standards or certifications.

"However, the findings of our analysis reveal that in the 2019-2021 period, it turns out that the actual portion for green funding, namely for 11 activities by banks is only 27 percent, while the majority is given to MSME social activities. In other words, many banks claim to have provide green funding, even though from the total given, there are more portions of funding for social activities and MSMEs," he said in a webinar, Tuesday, June 13.

Luthfyana added, in addition, OJK has also issued a green taxonomy, in which there are 919 sectors that have been confirmed by the relevant ministries.

However, the green taxonomy is known to be divided into categories, namely green (does not damage the environment), yellow (needs further review) and red.

"Unfortunately, in the yellow category it is stated that there is clean coal, which means that it is still permissible to fund it by banks even if they carry out a higher assessment," said Luthfyana.

According to him, the public must be aware that we can give a mandate when placing money in a bank.

"We can encourage the bank to fund a greener sector," he said.

He added that the initiatives of each bank are not ambitious if there is no mandate from the regulator (OJK), so OJK also needs to raise these standards.

Meanwhile, Asian Trend Researcher Andri Prasetiyo said that the banking sector must translate the coal-phase out terminology correctly.

Ideally, this effort is not merely to stop funding coal-fired power plant projects, but targets upstream mining, as well as derivative products from other coal uses such as coal gasification.

"In the future, banks that do not show clear and firm alignments on the issue of the climate crisis (both policy and practice) will have a great potential to be abandoned, where customers will switch to banks that are considered to have a better environmental and climate orientation," added Andri.

According to Andri, people already appreciate banks that are committed to no longer funding coal projects like BRI, so the social costs will be too big if the statement is not implemented.

"So, when the commitment appears, the bank should have thought calculatively which projects are not in accordance with the commitment. Therefore, BRI should immediately translate the commitment to stop coal and oil financing, into the company's internal policy in terms of lending, " he said.

Previously reported, Bank Rakyat Indonesia (BRI) through its CEO Sunarso stated that he would no longer finance coal and oil, during his visit to the World Economic Forum in Davos, Switzerland, some time ago.

This statement made BRI the first national bank to openly and explicitly take steps to stop funding coal.