A new report by Asia Research & Engagement (ARE) reveals that Indonesia's banking sector lags behind other ASEAN nations in implementing robust decarbonization policies and aligning with the 2050 net-zero targets.

"ASEAN banks have made significant progress − stronger governance, net-zero commitments, and restrictions on coal financing − but much more needs to be done," Ben McCarron, Founder and Managing Director of ARE, said in a statement on Thursday, October 9, 2025. "We urge banks in the region to collectively accelerate the transition to a low-carbon ASEAN."

Indonesia scored 50 percent in governance, 83 percent in risk management, 75 percent in green finance opportunities, but only 17 percent in policy, resulting in an overall benchmark score of 53 percent for 2025. This reflects an increasingly sophisticated banking system in managing climate risks, but with limited progress in implementing time-bound and robust decarbonization policies.

While most major banks in Indonesia have sustainability oversight at the board level, adopted the Task Force on Climate-related Financial Disclosures (TCFD) principles, and begun reporting financed emissions using the Partnership for Carbon Accounting Financials (PCAF) methodology, only BRI has set a net-zero target for 2050 − 10 years ahead of Indonesia’s national target of 2060. Furthermore, none of Indonesia's banks have committed to halting financing for new coal-fired power plants (PLTU).

In contrast, banks in Thailand, the Philippines, and Malaysia have already outlined plans to phase out financing for new coal-fired power plants. For instance, Maybank and CIMB in Malaysia aim to phase out coal financing by 2040, while Hong Leong Bank (HLB) has rejected funding for coal-fired electricity projects since 2023. In Thailand, KBank has implemented a "no new coal" policy, with plans for complete phase-out by 2030.

The report warns that without stronger policies with clear deadlines, Indonesia's banks risk falling behind their ASEAN peers. While Indonesian banks have shown leadership in governance, the next challenge is whether they can lead in decarbonization by ceasing coal financing, supporting energy transition funding, and aligning with net-zero emissions targets by 2050.

The findings underscore a significant gap between banks that view climate policies merely as compliance and those aiming to lead climate action. Climate action leaders stand to benefit from greater financing opportunities in emerging sectors, reduced risks associated with high-carbon industries, broader access to sustainable supply chains, enhanced reputational trust, and better preparedness for regulatory developments.

The key to progress lies in banks adopting sectoral decarbonization pathways across high-carbon sectors. This path must be discussed with clients at all levels of capital provision, including corporate, project, and third-party emission financing