On 27 September 2023, the International Financial Corporation (IFC) in collaboration with Inisiatif Keuangan Berkelanjutan Indonesia (IKBI) invited several Bank Institutions to discuss the business opportunity of sustainable finance and in specific the risk assessment of climate change to investment portfolios. Tri Hita was honoured to be invited to this event and participate in the discussion.
The Sustainable Finance Market has been rapidly growing over the past years. Driven by global investors, there is US$ 23 Trillion of investment opportunity for climate in emerging global markets, with US$ 16,046 Billion alone in East Asia and Pacific Regional, making it the most potential region.
In Indonesia, the IFC estimates a US$ 274 Billion climate investment potential by 2030, with US$ 209 Billion in green buildings, US$ 23 billion in Renewable Energy, and US$ 20 billion in the transport sector, including critical infrastructures. Financial Institutions have an essential role to steer financing into low carbon economy sectors. Banks must have a strategic commitment to their short and long-term plan. On their operation side, banks might increase the percentage of green portfolio and reduce financing to GHG-intensive industries. Further, risk assessments are necessary to ensure that their investment portfolio will not default in the near future. All these actions would help to achieve the neutral carbon goals in the future in mitigating climate change issues.
The banks reflected in the discussion session that currently mainly sustainability linked loans and bonds are interested. Further, they showed interest in sustainable housing, green plantations and energy intensive industry investments. They requested further assistance with technical know-how on how to assess the projects and also regarding other financial instruments.
In the discussion, IFC also introduced a risk assessment tool, ThinkHazard!, which provides information about hazard phenomena triggered by geophysical, hydrologic and meteorologic processes. It is based on historical data, so it could help a Financial Institution to assess the risk of their fund. It is an open-source tool meant to support financial institutions. The banks provided the feedback that currently the guideline of OJK is very ambitious and that it is very challenging to apply risk assessments to the investment portfolios.
Sustainable finance is becoming more critical than ever to ensure climate-related projects are developed and maintained successfully. Tri Hita is distinguished for supporting a sustainable financing ecosystem in Indonesia and Southeast Asia. Want to find out more about how to access sustainable finance? Talk to our team..
