ASIATODAY.ID, JAKARTA – World Wildlife Fund (WWF), a community organization working in the field of conservation and sustainable development has released the Sustainable Banking Assessment (SUSBA) report.
This report reveals a comprehensive assessment regarding the integration of environmental, social and governance (LST/ESG) aspects for 39 banks in ASEAN countries and 10 large banks in Japan and South Korea.
Specifically for Indonesia, the 2023 SUSBA report covers 11 private banks and State-Owned Enterprises, the highest number of respondents in the entire ASEAN and East Asia regions.
The latest SUSBA report noted the addition of three banks compared to the previous year, namely Bank BPTN, BSI and Bank Danamon.
Of the 11 banks, only four have committed to achieving net zero. Then, the development of financial products that support the net zero transition is still limited, especially for small and medium scale. And also, the risk of the impact of nature and biodiversity on financial performance has not yet become an urgency for most banks in Indonesia.
WWF-Indonesia Chief Conservation Officer Dewi Rizky explained, Indonesia is geographically vulnerable to climate change. Based on data scores on each country’s climate change vulnerability (ND-GAIN 2021), which measures vulnerability and preparedness to physical climate risks, Indonesia requires strengthening climate actions.
This includes the private sector with transition risks such as regulatory dynamics at the global level, rapid technological developments and changes in market conditions.
“Banks’ performance as financial intermediation institutions is not free from exposure to climate change risks. “Changes in markets and policies related to fossil fuels, for example, are a risk that banks need to take into account,” said Dewi, quoted on Saturday, June 22 2024.
“Therefore, banks need to increase their capacity to identify and manage two main risks, namely climate change and environmental damage. “At the same time, banks also play an important role in increasing the resilience of other sectors to climate change,” added Dewi.
The net zero target will not be achieved without real steps to maintain environmental conditions. Based on SUSBA 2023, banking support to reduce negative impacts on nature and society is still very limited (5%).
One of SUSBA’s positive findings shows that the highest banking management (Directors and Commissioners) already has the function and responsibility to manage ESG risks and climate change. However, banks’ capacity to measure the level of risk is still minimal and needs to be improved.
The SUSBA report shows that only four banks have a net zero target, namely BRI and BTPN in 2050, and BCA and BNI in 2060. Two banks (BCA and BRI) have calculated greenhouse gas (GHG) emissions, but only one bank (BRI) which implements the Science-based Target Initiative (SBTi).
Need Extra Attention
Sustainable Finance Lead, WWF-Indonesia Rizkia Sari Yudawinata added, Indonesian banks need to increase efforts on policies and procedures so that their customers have mitigation plans/action plans to achieve the targets of the Paris Agreement.
“Small and medium industries involved in the supply chain deserve extra attention because they are generally labor intensive and are a group that is vulnerable to the risks of climate change,” he said.
Data from OJK and BPS shows that the credit ratio to the MSME group will reach 12.38% of total banking assets in 2023. Based on SUSBA 2023, specific support distributed to small and medium enterprises (SMEs) in transitioning to implementing sustainable practices is still very limited (27%).
Without strong support, labor-intensive industries are vulnerable to being isolated. Banking needs to develop products that provide solutions and at the same time facilitate their steps in implementing sustainable practices. (ATN)
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