Financial Service Institutions (FSIs) practice in Indonesia have not yet effectively addressed ESG criteria into their core business activities as a part of their risk management strategies. Regulation regarding sustainable finance is still deemed superficial and has yet to touch the substance. The existing regulation have not been able to clearly measure the financing risks of FSIs on ESG issues.
Furthermore, as a critical intermediary, FSIs serve a central role in driving capital to sustainable and green investment thus FSIs directly support inclusive and sustainable economic development and growth, one of which through responsible investment. The transformation process of harmonizing economic interests with environmental, human rights and inequality issues aims not only to accelerate the achievement of sustainable development goals (SDGs) but also to increase the resilience and competitiveness of FSIs.
As a heavily regulated sector, the compliance of FSIs in Indonesia is highly dependable on the mandate set by the government as a regulator. Meaning, a comprehensive regulation facilitates and optimizes the role of financial sector in promoting sustainable ecosystem so that the principles of sustainable finance become an integral part of FSIs practices.