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Is Indonesia’s sustainable finance taxonomy serving its national interests effectively?

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TLDR:

Indonesia’s updated sustainable finance taxonomy, the Indonesian Taxonomy for Sustainable Finance (TKBI), brings about improvements such as aligning with the Asean taxonomy and categorizing activities into “green,” “transitional,” and “doesn’t meet criteria.” However, the decision to classify new coal-fired power plants as “transitional” undermines the credibility of the taxonomy and raises doubts about Indonesia’s commitment to lowering emissions. The lenient standards set by the TKBI could lead to financial losses for investors and hinder the country’s green transition.

Article Summary:

The article discusses Indonesia’s updated sustainable finance taxonomy, the TKBI, which aims to support national interests and align with other taxonomies. While it categorizes activities into “green,” “transitional,” and “doesn’t meet criteria,” the decision to classify new coal-fired power plants as “transitional” has raised concerns. This classification is not science-based and undermines Indonesia’s efforts to reduce emissions in line with global commitments like the Paris Agreement.

The lenient standards set by the TKBI, such as allowing for carbon offsets and lack of a clear end date for high-emission activities, pose risks to investors and could lead to financial losses. The article also highlights the potential negative impact on Indonesia’s reputation as a sustainable investment destination, as financiers may find the unique classifications problematic. This divergence from international standards could deter investments and hinder the country’s green transition efforts in the long run.

The article emphasizes the importance of aligning Indonesia’s taxonomy with science-based targets and international standards to enhance its credibility and attract sustainable investments. It raises concerns about the economic implications of the TKBI’s classifications and calls for more stringent criteria to ensure the country’s sustainable finance efforts align with its national interests.

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