Jakarta, July 25, 2025 – Indonesia’s Ministry of Finance (MoF), Financial Services Authority (OJK), and Bank Indonesia are working to establish the Sustainable Finance Committee (SFC), as mandated by Law No. 4/2023 on the Development and Strengthening of the Financial Sector (P2SK). The move is part of a broader effort to bridge a significant financing gap in achieving the country’s climate targets, with a supporting government regulation currently under development.

A major step in that direction is the formulation of a White Paper[1] that outlines SFC’s governance structures and its strategic pathways in mobilizing greater flows of private capital toward sustainable development projects in Indonesia. In collaboration with the Policy Centre for the Financial Sector (PKSK) at the Ministry of Finance, Green Finance Institute (GFI) and Climate Policy Initiative (CPI) are currently finalizing this strategic document. Upon its upcoming release, the White Paper will lay out ways to enhance the SFC’s coordination role and increase investor confidence, with the ultimate goal of channelling capital into decarbonisation efforts while maintaining robust economic growth.

Addressing the significant investment gap

Despite policy momentum, Indonesia still faces a massive financing shortfall. According to the Climate Budget Tagging (CBT) Report by the Ministry of Finance (2018–2023), only IDR 702.9 trillion (USD 46.9 billion) has been spent on climate-related initiatives, just 16.4 percent of the estimated amount required to meet Indonesia’s Nationally Determined Contributions (NDCs). The remaining 83.6 percent roughly US$240 billion, must come from private and international sources.

“The scale of investment needed far exceeds what public finance alone can provide. Mobilising private investment is not just a priority, it is essential,” said Adi Budiarso, Head of PKSK.

“Mobilising private capital at scale is essential to meet the urgent challenges of climate change and build resilient economies. Indonesia’s leadership in establishing the Sustainable Finance Committee sends a powerful signal to global investors” added Rachel Kyte, UK Special Representative for Climate.

Towards a more robust sustainable finance ecosystem

In preparation for the White Paper, GFI conducted a 2024 study titled Investors’ View on Sustainable Finance in Indonesia identifying barriers to private capital inflows. Key recommendations from this study embedded in the White Paper include the establishment of investment platforms, regulatory clarity, and mechanisms for blended finance to facilitate private sector engagement.

“Our focus is on designing policy frameworks to unlock billions of dollars in investment for a resilient, zero-carbon economy. This requires dismantling structural barriers that hinder investor participation,” said Simon Horner, GFI’s Managing Director.

The formulation of the White Paper represents a critical milestone for Indonesia as it attempts to balance climate commitments with economic imperatives, leveraging private finance to drive its green transformation. The expected outcome is a coordinated SFC structure to align regulatory frameworks, project pipelines, and policy incentives, ensuring a stronger role for banks, institutional investors, project developers, and other key players in Indonesia’s green finance ecosystem. “Indonesia is at a pivotal moment. The groundwork is being laid to transform the financial landscape and make sustainable investment the norm rather than the exception. Collaboration between government, public sector and private sector must be strengthened to scale up green finance and meet Indonesia’s overall climate targets,” CPI Indonesia Manager Luthfyana Larasati concluded.

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[1] MoF/GFI/CPI White Paper on the Sustainable Finance Committee (forthcoming)