Green financing for supporting sustainable agriculture in Indonesia

Abstract

Sustainable finance is the overall support of the financial services sector to create sustainable economic growth by harmonizing economic, social and environmental interests. It is designed to meet the needs of achieving the Sustainable Development Goals (SDGs) as well as the Paris Agreement on Climate Change (PACC) 2015-2030. The international development financial institutions have committed to transforming their funding to support the SDGs and PACC. In Indonesia, the implementation of sustainable financial policies began with the Financial Services Authority Regulation number 51/POJK.03/2017 concerning the Implementation of Sustainable Finance for Financial Service Institutions, Issuers and Public Companies and Its regulation number 60/POJK.04/2017 concerning the Green Bond, so they have the opportunity to diversify funding sources as well as an instrument for de-risking when financing projects that support to solve the social inequality and environmental damage issues. Present green finance practices in agricultural sector as implementation of sustainable finance policy in Indonesia seems to be very limited. The limited green financing practices in Indonesia, such as for supporting sustainable food crops farming system, sustainable animal husbandry, sustainable fisheries, sustainable plantations, sustainable industrial forests, and organic food and beverages development projects, etc. The financial sources for implementing green financing are from national budgeting, the CPO export levy funds, low interest loan, and corporate social responsibility of Financial Service Institutions, Issuers and Public Companies.