Indonesia’s Green Taxonomy will strengthen green and sustainable instrument development, Deputy Commissioner for Financial System Stability of the Financial Services Authority (OJK) said at a G20 Finance Track Side Event here on Friday.
“We, together with the help of eight ministries, have finished Indonesia Green Taxonomy edition 1.0 to support the development of (financial) green tools,” Agus Edy Siregar explained.
According to OJK, the Indonesia Green Taxonomy is a guide for green economic activities that lists the classification of implementations that support environmental protection and climate change mitigation and adaptation, he noted.
It is also meant to serve as a reference for the preparation or arrangement of incentives and disincentives from various ministries and institutions, he said. It can also help financial services sector players understand and categorize green activities while developing a portfolio of products or services, he added.
Furthermore, the Green Taxonomy can help periodic monitoring of credit distribution, financing, and investment in the green sector and prevent false reports of green activities, also known as greenwashing, he informed.
Siregar said the Indonesia Green Taxonomy is still in edition 1.0, meaning its provisions and guidelines can still develop, depending on technological developments and climate change.
“We have designed the green taxonomy into (a scale of five) on which criteria and what necessary certification for a sector or subsector to turn green,” he added.
OJK will collaborate with Bank Indonesia in green reporting, which will encourage financial services institutions to enter numbers on green financing in their monthly reports, he disclosed.
“This is crucial because the world has talked about risk management for climate-related financial risk,” Siregar pointed out. However, he stressed that risk management can only be formulated after ascertaining the magnitude of both green financing and non-green financing.
“If we already know the magnitude then we can design incentives or disincentives. Now, we are still confused on how many (sectors are applying) green financing,” he explained.
Source: Antara News