This Bank Has the Strongest Commitment to Climate Change in Indonesia

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Adi Ahdiat 22/09/2023 14:05 WIB

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According to research firm Prakarsa, HSBC had the strongest commitment to climate change mitigation among banks in Indonesia in 2022.

Bank Commitment Score in Climate Change Mitigation in Indonesia (2022)

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This Bank Has the Strongest Commitment to Climate Change in Indonesia

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Bank Commitment Score in Climate Change Mitigation in Indonesia (2022)

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Ideally, banks can play a key role in mitigating climate change, such as through financing the energy transition, investing in low-carbon sectors, and providing financial support for various environmentally friendly projects.

However, banks already playing this role seem scarce. This is evident from the assessment by the research institution Prakarsa, as outlined in the *2022 Bank Ranking Report: Measuring the Progress of Sustainable Financial Policies in Indonesian Banking*.

Prakarsa assessed the climate change mitigation commitment of 11 banks operating in Indonesia. These banks were selected as representatives of the largest national commercial banks, foreign banks, and regional development banks.

The assessment was conducted based on an analysis of annual reports, sustainability reports, information on company websites, policy documents, and other relevant information disclosed by the banks to the public.

The analysis then focused on corporate loans, project financing, assets owned, and client assets managed by each bank.

Prakarsa formulated the results of their analysis into a score ranging from 0 to 10, with the following categorization:

* Score 0 to 1.9: Very Low Commitment
* Score 2 to 3.9: Low Commitment
* Score 4 to 5.9: Moderate Commitment
* Score 6 to 7.9: Good Commitment
* Score 8 to 10: Very Good Commitment

Using this method, in 2022 HSBC obtained a score of 4 in climate change mitigation commitment, the highest among all banks analyzed.

According to Prakarsa, HSBC's score falls into the "moderate" category because they have adopted international standards for project financing related to climate change, such as the International Finance Corporation (IFC) Performance Standards and Equator Principles.

"In key sectors, such as oil, gas, and thermal coal, HSBC encourages companies/clients to have transition/decarbonization plans and phased cessation," said the Prakarsa team in their report.

"HSBC has set a target to increase renewable electricity for operations to 100% by 2030, and to align financed emissions with the goals of the Paris Agreement by 2050," it continued.

Prakarsa also found that in 2022, only a few banks had policies regarding the disclosure of greenhouse gas emissions from projects they financed.

Banks that limit financing for thermal coal power plants/mining are also a small minority, namely HSBC, DBS Indonesia, and Maybank.

"HSBC, DBS, and Maybank announced that they would not provide financing support for new coal, and would gradually cease loans in such projects to achieve NZE (net zero emission) by 2050," said the Prakarsa team.

Based on these findings, Prakarsa encourages banking institutions and the government to strengthen financing policies related to this issue.

"In policymaking, banks can refer to the sustainability criteria developed by FFGI (Fair Finance Guide International) and various existing international standards," they said.

"The OJK (Financial Services Authority) can accelerate the implementation of sustainable finance and green financing by mandatorily implementing a green taxonomy. The OJK also needs to develop incentive and disincentive schemes to attract banks," it continued.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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This Bank Has the Strongest Commitment to Climate Change in Indonesia

This Bank Has the Strongest Commitment to Climate Change in Indonesia

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