Indonesia: Environment-destroying firms will find obtaining loans difficult

Antara 24 Nov 15;

Jakarta (ANTARA News) - Companies which frequently destroy the environment while carrying out their businesses will find it hard to obtain bank loans.

This was said by the Chairman of the Board of Commissioners of the Financial Service Authority (OJK), Muliaman Hadad.

Speaking at a seminar on sustainable financing to support Sustainable Development Goals (SDGs) here on Monday, Muliaman urged banks to select any company applying for loans on the basis of principles of environmental destruction mitigation.

"Dont expect that companies which destroy the environment can obtain bank loans in the future," he said.

"Banks must also exercise caution to extend credits to companies polluting the environment," he said.

Companies applying for bank loans must at least have obtained environmental impact analysis certification as set forth in the roadmap for sustainable finance, he said.

He further said the OJK will provide manuals to entrepreneurs so that they can increase their role as an intermediary in the economic fields, such as infrastructure, manufacturing and agriculture, while at the same time maintaining the principles of sustainable finance.

"So companies must be smart in managing environmental, social and good governance aspects in making their business decisions," he said.

Right now, the OJK has teamed up with eight banks to serve as a pioneer of sustainable financial industry. The eight banks are Bank Mandiri, BRI, BCA, BNI, Bank Muamalat, BRI Syariah, BJB and Bank Artha Graha Internasional.

"The eight banks control 46 percent of the national banks assets," he said.(*)

Indonesia to Make Green Financing Compulsory for Banks by 2018
Chanyaporn Chanjaroen Yudith Ho Bloomberg 23 Nov 15;
* Regulator to draft Green finance regulations by next year
* Eight banks to take part in pilot project for palm oil finance

Indonesia’s financial regulator will introduce rules to restrict banks’ lending to environmentally-damaging projects by 2018, which may eventually help the nation curb the forest fires that choke parts of Southeast Asia with thick haze for months each year.

The Financial Services Authority, known locally as OJK, is aiming to draft regulations by next year to target agriculture, energy, fishery and microfinance companies, Edi Setijawan, the regulator’s deputy director for banking architecture, said by phone on Monday. The rules would build on guidelines for sustainable financing in the palm oil industry that the nation’s eight largest banks will test starting in January, he said.

While not specifically directed at the forest fires, policing the environmental impact of projects and activities of companies that borrow funds from its banks will help Indonesia curb the burning that this year covered an area four times the size of Bali island. Lit to clear land for plantations, the fires caused a smoky haze that spread as far as southern Thailand and the Philippines, and turned Indonesia into the world’s worst greenhouse gas polluter.

“We can’t ban banks from lending to any non-sustainable projects as the economy would grind to a halt, but that’s something we’re moving towards,” Setijawan said. “Later on, banking can also be used to prevent what happened a few months ago, the terrible haze.”

The regulator in the next two to three years may ask banks to invest in companies and projects deemed sustainable, to offset any funds given to non-environmentally friendly activities, he said.

The eight largest Indonesian banks including PT Bank Central Asia and PT Bank Mandiri will work with the World Wildlife Fund in integrating sustainable financing criteria for the palm oil industry in a pilot project from January, the Swiss-based WWF said earlier on Monday in an e-mailed release.

The 18-month project aims to help Indonesian banks’ take into account environmental, social and governance issues when they make lending decisions, according to the WWF. Participating banks will also look to direct more funding to businesses that implement sustainable practices, the organization said.

Only four major banks in Indonesia, Malaysia and Singapore have embedded environmental factors as part of their credit-decision process, the WWF said in a May report. The Association of Banks in Singapore on October 8 introduced guidelines on responsible financing targeting sectors including agriculture, energy, forestry and minerals and said its 158 members will start the implementation in 2017.

Banks pledge to support green finance
Grace D. Amianti, The Jakarta Post 24 Nov 15;

The nation’s eight largest banks, representing 46 percent of national banking assets, have committed to implementing sustainable financing as part of global environment goals.

Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Central Asia (BCA), Bank Negara Indonesia (BNI), Bank Muamalat, BRI Syariah, Bank Jabar Banten (BJB) and Bank Artha Graha Internasional signed the commitment with the Financial Services Authority (OJK) and the World Wildlife Fund (WWF) Indonesia on Monday.

The commitment was manifested in a pilot project called “first step to becoming a sustainable bank”, marking a big move taken by the banks less than a year after the OJK launched the 2014-2019 Sustainable Financial Roadmap, according to OJK head Muliaman D. Hadad.

“I hope these eight banks, which are the prime movers in this project, can encourage other banks and financial institutions to join the country’s implementation of sustainable finance,” Muliaman said in his speech.

Through the green banking pilot project, Muliaman said participating banks were expected to balance their pursuit of profits with willingness to conserve the environment, serving as examples to their peers.

WWF Indonesia CEO Efransjah said the commitment would increase banks’ power to encourage their clients to enact environmental, social and governance aspects in their business processes.

Efransjah said the pilot project would run for a year and a half starting in January 2016, with the first phase taking place in the palm oil sector, adding that the sector was selected because it was frequently associated with environmental issues.

The pilot project was also based on the OJKs roadmap, part of a partnership with the government through the Environment and Forestry Ministry. The roadmap is hoped to help the country meet the UN’s Sustainable Development Goals next year.

The OJK and the environment ministry, Muliaman said, were partnering in a task force identifying companies that implemented environmentally friendly principals and fully complied with the government’s Environmental Impact Analysis (Amdal) regulations.

“Through investigation and monitoring efforts, we can ensure it is difficult for companies that damage the environment to obtain loans and financing,” he said, adding that banks’ credit quality would automatically decrease if the banks lent funds to environmentally damaging companies. “We are in the process of following up the results of sustainability reports,” he said.

According to BRI president director Asmawi Syam, the project would allow the bank to gradually build sustainability partnerships with major companies, while also spreading awareness of green activities in the lower segments of the market.

Bank Mandiri president director Budi Gunadi Sadikin said the lender had started green finance projects in micro-hydro power plants and biomass and sustainable palm oil. As of September, Mandiri’s loans to palm oil plantations stood at Rp 49 trillion (US$3.57 billion), up by 8.8 percent year-on-year.

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