, Jakarta The Asian Development Bank (ADB) again reminded Indonesia’s financial sector to continue contributing to efforts to prevent climate change.

Senior Financial Sector Specialist at ADB, Benita Ainabe, emphasized that the impact of climate change cannot be ignored, especially in the financial sector.

“Therefore, in the future, more direct financial support and sustainable policies and programs are needed even though there are already policies that encourage environmental protection,” Benita said in an ADB webinar discussion. Tuesday (29/8/2023).

Benita said that collective action is essential to support green finance, including innovations that link financial inclusion efforts with providing green energy services for rural communities and those who remain off-grid in Indonesia or are underserved in their energy needs.

“Regional finance, and particularly regional bonds. Why is this important? Because basically, it leads to infrastructure,” he said.

Inadequate infrastructure, mainly due to past underinvestment in Indonesia, impedes inclusive growth significantly.

“The government recognizes this and has therefore embarked on an ambitious infrastructure development agenda, which includes a significant increase in public sector spending, as well as policy and institutional reforms that create an enabling environment for public-private partnerships, and private sector investment in general,” he continued.

Infrastructure Funding

“The numbers have increased year-on-year, but the private sector must play a meaningful role in Indonesia’s infrastructure development,” she added.

“Therefore, ADB and other development partners have been working with the Indonesian government, including in the regions, to pilot local bond issuance schemes, to build capacity, introduce relevant regulations, and get them ready for the capital market,” Benita said.

ADB estimates Indonesia will likely opt for general and green bonds in the first phase.

ASEAN could lose 37.4 percent of GDP by 2048 if climate change mitigation is not implemented

Climate change illustration (AFP)

Previously, Indonesia will hold the 43rd ASEAN Summit 2023 on September 5-7, 2023. One of the results of the agreement that the public is waiting for from the ASEAN Summit is the efforts of ASEAN leaders in responding to the impacts of climate change.

Publish What You Pay (PWYP) Indonesia researcher Mouna Wasef explained that the Southeast Asian region is more vulnerable to the impacts of climate change. Geographically, for example, most of the population is in coastal areas and islands, at risk of rising sea levels.

The intensity of floods, typhoons, and disasters caused by extreme weather in the region has also tended to increase in recent years.

Mouna said ASEAN is at the forefront of climate risk. Using a scenario of average global temperatures increasing by 2.3 degrees Celsius by 2050, 600 million Asians could be hit by annual heat waves, 75 percent of potential economic losses from yearly flooding, and three or four times more extreme rainfall in Asia, including the ASEAN region.

“ASEAN as a region could lose 37.4 percent of its Gross Domestic Product (GDP) by 2048 if climate change mitigation and energy transition are not carried out,” he said in a written statement Sunday (27/8/2023).

Indonesia, Malaysia, the Philippines, Singapore, and Thailand will lose economic output, totaling more than seven times their GDP by 2050.

“With Indonesia’s GDP currently reaching Rp 21,000 trillion, Indonesia has the potential to lose Rp 147,000 trillion if it does not mitigate climate change,” Mouna added.

The public’s high hopes and expectations of the outcome of the 43rd ASEAN Summit 2023 in responding to climate change issues must be accompanied by concrete deliverables and increased commitment to their implementation.

“Admittedly, there is still a lot of pessimism towards implementing ASEAN leaders’ commitments due to the ‘principle of non-interference and respect for national sovereignty as inhibiting factors. In addition, the absence of an accountability mechanism for commitment documents is also a hindering factor,” Mouna explained.

Reduce greenhouse gas emissions

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ASEAN already has several commitment documents to address the impacts of climate change through accelerating the energy transition, including the ASEAN Plan of Action for Energy Cooperation 2016 – 2025, ASEAN Energy Outlook 2017 – 2040, and the ASEAN Joint Statement on Climate Change COP23.

In the ASEAN Energy Cooperation Plan Phase II 2021-2025, there is a commitment to reduce 25% of greenhouse gas emissions by 2030. Also, increase the share of renewable energy to 23% by 2025 of the total primary energy supply.

“Again, the question is the same: is there an accountability mechanism? Are there any consequences if ASEAN member states do not implement a commitment?”

For this reason, Indonesia’s role as the 2023 ASEAN Chairmanship, as well as the largest democracy in the region, is very strategic to be able to direct and provide concrete examples and commitments to accelerate the implementation of the energy transition.

“We also urge ASEAN Leaders, especially the Government of Indonesia, to be able to provide more space for public involvement, including civil society organizations, academics, and journalists in several discussions related to energy transition in ASEAN forums,” said Mouna.