Diagnostic Study on green finance in Indonesia

As a result of the Paris Agreement in 2015, Indonesia has set itself a target of greenhouse gas emission reduction of 29 % by 2030. In reaching its Nationally Determined Contribution (NDC), the sectors of land use, land-use change, and forestry (LULUCF) play a key role, and renewable energy is supposed to be increased substantially according to the National Energy Policy (NEP). A clear and consistent strategy and environment for Sustainable Finance can be key for financing these goals. Indonesia has created relevant policies that provide guidance for and promote sustainable finance in the country. Despite high compliance of the financial institutions, the implementation of sustainable finance has not yet advanced as much and as fast in Indonesia as originally intended and there is a potential to further enhance its current policies and regulations.

Against this backdrop, it is KfW’s intention to partner with the Indonesian Government to create the right framework conditions, which will further foster green finance in Indonesia. Therefore, KfW commissioned adelphi with a diagnostic study on green finance with a focus on the analysis of possibilities for of policy and reform enhancements in Indonesia. The study provides an overview and detailed analysis of planned green finance policy reforms and assesses gaps with the help of good practices from other countries. It also identifies possibilities for policy-based lending interventions.