Friday, February 23, 2024

Major Asian banks criticized for weak coal policies

Reading Time: 2 minutes
Journalist IBP

Journalist

Editor

Interview

A recent report by Coal Havens assessed coal policies among the 30 largest banks in the Philippines, India, Indonesia, Japan, Malaysia, South Korea, Singapore, Taiwan, and Thailand, which manage total assets exceeding US$ 8 trillion. The study revealed that major Asian banks either lack or have weak coal exclusion policies. Meanwhile, a BankTrack report found that corporate financing remains a preferred option for building new coal infrastructure, indicating gaps in coal exclusion policies.

This provides leeway for the banking industry to continue financing new coal projects, despite global consensus to transition away from fossil fuels, as agreed upon at the COP 28 Climate Change Summit in December 2023.

Will O’ Sullivan, Climate Campaigner at BankTrack, expressed concern that the diminishing coal industry still receives funding from major banks in the Asia-Pacific region.

“Investors in Indonesia and multilateral banks such as the World Bank and IFC are still opening the door to climate damage when they should be distancing themselves from coal,” stated Will, on January 24, 2024.

A notable policy gap is observed in the sustainability policies of private sector lending institutions like the World Bank’s International Finance Corporation (IFC), particularly regarding captive coal-fired power plants (PLTU).

The IFC has adopted the “Green Equity Approach” (GEA), encouraging clients to reduce exposure to coal projects to near-zero by 2030. However, this policy does not include captive coal-fired power plants used for industries such as mining, chemicals, cement, smelters, etc.

Agung Budiono, Executive Director of the Indonesian CERAH Foundation, highlighted that Indonesia’s financial regulatory authority, Otoritas Jasa Keuangan (OJK), is in the final stages of formulating the Sustainable Finance Taxonomy, also known as green taxonomy.

However, in the latest draft, captive coal-fired power plants are categorized as a transitional sector.

“OJK needs to have a more forward-looking perspective on sustainable financing, and PLTU captive should not be classified, even if no longer green but rather transitional,” he emphasized.

Agung emphasized that the tightening of coal financing from external sources is perceived as an opportunity for national banks to finance the coal sector.

However, national banks should view financing fossil energy, especially PLTU, as a future risk, commonly known as a stranded asset.

Indonesia is among the countries that have launched the Just Energy Transition Partnership (JETP) agreement, excluding emissions data from captive coal-fired power plants in the Comprehensive Investment and Policy Plan (CIPP) 2023.

Including this data would significantly increase Indonesia’s emission projections, making it challenging to achieve the initial decarbonization targets of JETP.

On another front, the Financial Services Authority (OJK) is considering labeling captive coal-fired power plants as transitional in the Indonesian Sustainable Taxonomy if used to produce materials considered vital for energy transition.

Journalist IBP

Journalist

 

Editor

 

Interview

SUBSCRIBE NOW
We will provide you with an invoice for your reimbursable expenses.

Free

New to Indonesian market? Read our free articles before subscribing to the premium plan. If you already run your business in Indonesia, make sure to subscribe to the premium subscription so you won’t miss any intelligence & business opportunities.

Premium

$550 USD/Year

or

$45 USD/Month

Cancelation: you can cancel your subscription at any time, by sending us an email inquiry@ibp-media.com

Add keywords to your market watch and receive notification:
Schedule a free consultation with us:

We’ll contact you for confirmation.

FURTHER READING

President Director of State electricity company PT PLN, Darmawan Prasodjo, has suggested that hydrogen fuel cell vehicles as future transportation is much more efficient when compared to fuel-based, even electric vehicles.
Vale Indonesia, a subsidiary of Canadian company Vale, has denied the Indonesian government’s claim that Vale Indonesia and Indonesian state-owned mining holding company MIND ID had reached an agreement with the government on the price of divestment shares.
Pertamina Hulu Mahakam (PHM) has secured the final investment decision (FID) approval to proceed with the implementation of the more than US$ 300 million Offshore Field Development Project (OPLL-3B) in the Mahakam Block.
Vela Alpha, a drone developed by PT Dirgantara Indonesia or PTDI in collaboration with PT Vela Prima Nusantara, also known as Vela Aero, made its appearance at the Singapore Airshow 2024 aviation exhibition.
The Upstream Oil and Gas Regulatory Task Force (SKK Migas), along with Inpex Corporation, is still studying global liquefied natural gas (LNG) market projections to secure long-term gas sales contracts for the Masela Block.
Ministry of Energy and Mineral Resources (ESDM) is unveiling a promising prospect for sustainable energy development mainly in Papua’s hydropower and its potential export.