MATERI Indonesia Sustainable Finance Success Stories - EY

Sustainable finance in
Indonesia
4 May 2018
Agenda
1 What is sustainable finance?
2 Sustainable finance: what to do?

3 How banks respond to it: Story from global banks
4 How banks respond to it: Story from Indonesian banks
5 Key takeaways
Page 2 6 May 2018 Managing Climate Related Risk, Capturing Sustainable Finance Opportunities
What is sustainable finance?
The science behind sustainable finance
IPCC Representative Concentration Pathways (RCP)

 RCP 2.6 — a “severe mitigation” scenario where
significant efforts are made to transition from fossil
fuels to alternative energy sources and to try to limit
post-industrial global warming to 2°C.
 RCP 4.5 — an intermediate scenario with material
efforts to reduce emissions.
 RCP 6 — a higher greenhouse gas emission
version of the intermediate scenario.
 RCP 8.5 — a high greenhouse gas emissions (or
“inaction”) scenario with no additional effort to limit
emissions.
“More than 4°Celcius of warming this century would make the world uninsurable.”
Henri De Castries, AXA CEO 2015 on Climate Finance Day 2015
What is sustainable finance?
We all have role to play
Government and regulators
Consultant and
Asset owners Asset managers rating agencies Banks
Factor in ESG • Adapt business Help asset owners • Monitor their
considerations into strategy, to prioritize and balance sheet
investment decisions governance and balance their exposure to
organization investment decision stranding
culture to take into by incorporating risks/ESG risk Investee Physical
account ESG risk ESG analysis in their • Take climate- companies assets
and opportunities advice related factors into
• Factor in ESG account when
considerations making forward-
into investment looking lending
decisions decisions
Beneficiaries, employees, public, media and activists
How can financial institutions in Indonesia respond?
Requirements from POJK 51/2017
Short-term (1 year) and long-term (5 Sustainability

POJK years) sustainable finance action plan + report
51/POJK.03/
2017
Product
Governance Capacity development CSR Reporting
Past building
Present Near Future Known Future Unknown Future
► Organization alignment ► Internal capacity ► Green financial ► Allocate a portion of ► LJK, emiten and public
to embed sustainability building through products CSR funds to the companies are required to
function in the organization training and awareness implementation of issue a sustainability
► Green bonds
► Risk management campaign on the sustainable finance report.
implementation of the ► Increase lending to
improvement to include ► CSR fund allocation ► The SR shall report the
sustainable finance sustainable
ESG risk in the risk projects/ventures must be economic,
management and decision communicated in the environmental and
making ► Green index
business plan and social performance of
► Update policy and sustainability report the Company
procedure to embed ESG
aspect in the business process
What financial institution in Indonesia ought to do?
Generally accepted guidelines on sustainability
Rencana Aksi Keuangan Berkelanjutan (RAKB) Laporan berkelanjutan (Sustainability report)
Global Reporting Initiatives (GRI) Standards

Equator Principles
GRI sustainability reporting standards
UN – Sustainable Development Goals
What financial institution in Indonesia ought to do?
The requirement are staged into five stages from 2019-2025

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Develop and January 2019 January 2020 January 2022 January 2024 January 2025
submit
sustainable
finance action
plans (only
for LJK)
Prepare and April 2020 April 2021 April 2023 April 2025 April 2026
issue
sustainability
report (SR) –
latest
Period 1 Jan – 31 Dec 1 Jan – 31 Dec 2020 1 Jan – 31 Dec 2022 1 Jan – 31 Dec 2024 1 Jan – 31 Dec 2025
covered by 2019
the SR
LJK in scope 1.Bank 1. Bank kategori BUKU 1 dan 2 1. Bank 1. BPRKU 1 dan 2 Dana pensiun dengan
2. Perusahaan publik Perkreditan 2. Emiten dengan total aset Rp1 triliun
kategori 3. Perusahaan pembiayaan infrastruktur Rakyat (BPRKU) aset skala kecil
Bank Umum 4. Perusahaan asuransi (umum dan syariah) 3 3. Perusahaan
Kegiatan 5. Perusahaan reasuransi, perusahaan 2. Emiten dengan pergadaian
Usaha reasuransi (umum dan syariah) aset skala 4. Perusahaan
6. Badan Penyelenggara Jaminan Sosial menengah penjaminan (umum
(BUKU) 3 (BPJS) dan syariah)
and 4 7. Emiten (selain emiten dengan aset skala 5. Perusahaan efek
2.Foreign kecil dan emiten dengan aset skala yang tidak
menengah) mengadministrasik
banks 8. Perusahaan pembiayaan (umum dan an rekening efek
syariah) nasabah
9. Perusahaan modal ventura (umum dan
Page 7 6 May 2018 syariah)
Managing Climate Related Risk, Capturing Sustainable Finance Opportunities
10. Lembaga Pembiayaan Ekspor Indonesia
How banks respond to it?
Banks’ effort mapped with POJK 51 requirement
BNI Bank Mandiri Westpac1 Danske Bank2
Governance
P
O      
J G
K’ Capacity building
s      
re T
q
ui Product development
re      
m P
e CSR
nt C      
a Reporting
s      
p
R
e
ct
s Sustainability report assurance    
1. Westpac is designated as the most sustainable bank globally in the 2017 Dow Jones Sustainability Indices Review
2. Danske Bank is named as #4 in the Global 100 Most Sustainable Companies and the first among financial institution in the list
(Australia)
Awarded as the most sustainable bank globally in the 2017 Dow Jones Sustainability Indices Review
Aspects Selected initiatives G P C
Governance
Embracing Inclusion for customers, people and communities v
Established five-year plan
(2013-2017): 10 objectives societal
Support gender equity (50% women in leadership roles) v
across three broad areas: change
society, environmental, Delivered free access to math education and launched 200 th
v
better financial futures Westpac scholar
Environmental Issued climate bonds v
Sustainable leadership solutions
Increase lending and investment in CleanTech and environmental
v
• Sustainability council services
• Committee: Waste recycling v
Environmental
management; Carbon neutral status v
indigenous advisory
• Working group: Clean Improvement in electricity efficiency v
technology, social and Better financial Improving banking access v v
affordable housing and futures
human rights Increased lending to social and affordable housing v
Reporting Financial literacy training v
Produced sustainability Released Financial Inclusion Action Plan v

report. Assured by 3rd Evolving products and services (e.g. low cost credit card) v
party.
(1/2)
Governance
Members of sustainability
Established BNI Sustainability Pillars organization
Aligned business operations and initiatives with the SDGs

SDG #1: Poverty alleviation
Disbursed CSR fund for poverty alleviation (IDR14.97 billion)
SDG #6: Clean water and sanitation
Disbursed CSR fund for health improvement (IDR2.59 billion)
SDG #7: Affordable and clean energy
Financing investment of renewable energy Eco-friendly banking operations
Electricity and water
SDG #8: Decent work and economic growth conservation
Employee value proposition, allow labor unions, prioritize OHS
SDG #12: Responsible consumption and production Green building certification – BNI
Saved paper consumption (2,085 tons in 2016), develop trash Tower
bank, develop waste recycle concept
Maintenance and exhaust
SDG #13: Climate action emissions testing on vehicle
Planted 8.14 million trees. In 2016, BNI saved 42 mWh of electricity
*) per September 2016

(2/2)
Product development Reporting
Increase in supply of green funding Funding sector for sustainable 2009
The portfolio of green financing for the development
corporate segment amounted to IDR21.57  Construction
trillion* or 10.68% of total corporate loans  Agriculture
and 6,39% of the total loan portfolio
(exclude Consumer loan)  Telecommunications
 Electricity, gas and water
Green projects:  Housing
 geothermal power plants
2015
 mini-hydro CSR
 biogas
 sustainable palm oil
Capacity building
2016
ESG training for employee
Launched sustainable banking BNI app to

support capacity building in sustainable
finance supply
Key takeaways
Setup governance mechanisms

help to enhance transparency and
accountability, led by CEO
Align core business and
strategic initiatives with the
SDGs Setup responsibility policy based on a
number of internationally recognized
principles in the areas of human rights,
employee rights, the environment and
anti-corruption
Systematically
integrate corporate
responsibility in core
business
Engage with
stakeholders
THANK
YOU
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Sustainable finance in

1 What is sustainable finance?

2 Sustainable finance: what to do?

IPCC Representative Concentration Pathways (RCP)

Beneficiaries, employees, public, media and activists

Short-term (1 year) and long-term (5 Sustainability

Global Reporting Initiatives (GRI) Standards

UN – Sustainable Development Goals

Reporting Financial literacy training v

Produced sustainability Released Financial Inclusion Action Plan v

Aligned business operations and initiatives with the SDGs

*) per September 2016

Launched sustainable banking BNI app to

Setup governance mechanisms

EY is a global leader in assurance, tax, transaction and

EY refers to the global organization, and may refer to one

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