Jakarta, 28 July 2026 — Indonesian civil society organizations, together with civil society organizations (CSOs) from various countries, are calling on the banking sector to strengthen accountability for financing activities that pose risks of driving deforestation and forest fires. The call was delivered through an open letter sent to 190 financial institutions across various countries ahead of the potential intensification of the El Niño phenomenon through 2027. In Indonesia, the letter was addressed to Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI), Indonesia Eximbank, Panin Bank, and Bank Danamon Indonesia.
According to projections from the National Oceanic and Atmospheric Administration (NOAA) and the World Meteorological Organization (WMO), El Niño is expected to develop to moderate-to-strong levels through 2027. These conditions could increase drought across tropical regions, heighten the risk of forest and land fires, and threaten food security and community livelihoods.
These risks have already become apparent since the beginning of the year. Data from Nusantara Atlas shows that, as of June 2026, the cumulative burned area in Indonesia had reached 103,144 hectares. The ten provinces with the largest burned areas include East Nusa Tenggara, West Kalimantan, Riau, South Papua, West Nusa Tenggara, Maluku, Riau Islands, East Java, Central Papua, and Southeast Sulawesi. Meanwhile, as of 27 July 2026, the cumulative number of fire hotspots in Indonesia had reached 96,736, with West Kalimantan recording the highest number at 14,933 hotspots, or around 15% of the national total, demonstrating the province’s high vulnerability to forest and land fires.
At the same time, data from Forests & Finance shows that between 2016 and 2025, global financial institutions provided at least US$429 billion to the timber, soy, rubber, pulp and paper, palm oil, and cattle sectors—industries that are major drivers of deforestation and contribute to increasing forest and peatland fire risks. In addition, between 2016 and 2024, banks provided US$32 billion in loans and underwriting to mining operations in Indonesia. Of this amount, the 20 largest banks accounted for approximately 81%, or US$26 billion (Rp386 trillion), with Bank Mandiri providing the largest amount of financing at US$6.4 billion (approximately Rp96 trillion). The scale of these financial flows demonstrates that the financial sector plays a critical role in either driving or preventing environmental risks through its financing policies.
Executive Director of TuK INDONESIA, Linda Rosalina, said that while El Niño is a natural phenomenon, the severity of fires is determined by how forests and land are managed. According to her, the risk of fires is exacerbated by forest clearing, peatland drainage, and financing decisions that continue to support such practices.
“El Niño cannot be prevented, but its impacts can be minimized if the financial sector stops financing business models that destroy forests. Therefore, the financial sector cannot be treated as a neutral actor in addressing the climate crisis,” Linda said.
TuK INDONESIA also highlighted the importance of implementing comprehensive due diligence across banks’ entire financing portfolios. One case of concern involves Bank Danamon Indonesia, which is majority-owned by Mitsubishi UFJ Financial Group (MUFG). Although MUFG and Bank Danamon have adopted a No Deforestation, No Peat, No Exploitation (NDPE) policy for palm oil sector financing, a 2025 report by the Rainforest Action Network (RAN) found that Bank Danamon provided US$281 million in credit facilities to PT Tunas Baru Lampung Tbk (TBLA) between 2020 and 2022. The company has been reported to have converted thousands of hectares of peatland in South Sumatra, with fires occurring within its concessions in 2023.
TBLA subsidiary PT Dinamika Graha Sarana (PT DGS) was also found liable for land fires by the Kayuagung District Court and ordered to pay compensation and undertake environmental restoration, although legal proceedings in the case remain ongoing. According to Linda, the case demonstrates that sustainability commitments must be proven through consistent implementation rather than simply existing as corporate policies.
“NDPE commitments must be implemented through due diligence processes covering all clients and financing portfolios. Without this, sustainability policies will remain promises on paper, while ecological damage and social costs continue to be borne by communities,” she stressed.
Similarly, Aryanto Nugroho, National Coordinator of PWYP Indonesia, emphasized that the financial sector’s commitment to stopping financing for forest and peatland destroyers will remain an illusion if banks continue financing mining activities and coal-fired power plants.
“Banks’ sustainability policies cannot be selective. Stop financing peatland destroyers, stop financing mining, and immediately phase out support for coal-fired power plants,” Aryanto said firmly.
Executive Director of PRAKARSA, Victoria Fanggidae, highlighted that banks’ preparedness to address these risks can already be measured. The Bank Rating Report issued by the ResponsiBank Indonesia Coalition found that banks’ average policy score was only 2.1 out of a maximum of 10. In the forestry theme, the average score increased from 1.1 in 2022 to 2.0 in 2024, which remains far from adequate.
“A score this low means that most banks’ forestry policies have yet to address critical issues such as prohibiting peatland conversion, respecting community rights, and ensuring supply-chain transparency. As El Niño approaches, these policy weaknesses are becoming real risks on the ground,” Victoria said.
She urged the Financial Services Authority (OJK) to strengthen the Indonesia Sustainable Finance Taxonomy and issue binding implementing regulations, accompanied by independent audits and incentive and disincentive schemes, so that banks’ sustainability commitments can be verified.
National Coordinator of Pantau Gambut, Iola Abas, explained:
“An analysis by Pantau Gambut found that approximately 3 million hectares of peatland burned between 2015 and 2024, with a significant increase during El Niño years. El Niño must not be used as an excuse when peatlands burn. The phenomenon does increase drought and fire risks, but it is not the sole cause of the disaster. Its impacts become far greater when peatlands have been drained, converted, and left without restoration. Ahead of the 2026/2027 El Niño, the government must evaluate concessions that have repeatedly experienced fires and ensure that hydrological restoration is actually carried out. Financial institutions should also not continue supporting business activities that perpetuate these vulnerabilities. If this situation is allowed to continue, peatlands will remain highly vulnerable to fires, while the impacts and costs of restoration will once again be borne by communities.”
Amid the threat of an El Niño emergency, Adam Putra Firdaus, Head of the Forestry and Biodiversity Division at the Indonesian Center for Environmental Law (ICEL), emphasized that forest and peatland destruction should not be viewed solely as the actions of perpetrators on the ground, but also as the result of financial flows supporting destructive activities. Therefore, financial institutions should no longer be viewed as neutral actors, but as parties that must also be held accountable when they continue providing financing to those responsible for forest and peatland destruction.
“From a civil law perspective, such actions may be linked to the doctrine of unlawful acts, particularly where there has been negligence in implementing adequate due diligence or where financing continues to be provided despite environmental damage and its impacts on public safety being known from the outset. Financial gains must not be built on financing forest and peatland destruction that exacerbates the climate crisis,” Adam said.
Regarding the high fire risk in West Kalimantan, Sri Hartini, Executive Director of WALHI West Kalimantan, said that the province has approximately 2.79 million hectares of peatland, which are currently covered by at least 135 palm oil plantation permits, 35 Forest Utilization Business Licenses (PBPH), and 123 Mining Business Licenses (IUP).
According to her, following the major fires in 2015, WALHI West Kalimantan found that many companies experienced fires within their concessions due to poor peatland management, including the construction of canals that drained peatlands and increased their vulnerability to fire. To date, restoration of burned areas has not been adequately carried out, while sanctions imposed have failed to provide a sufficient deterrent effect.
“As a result, practices that damage peatland ecosystems continue to recur and the risk of fires remains high. Therefore, financial institutions must stop providing financing to businesses that repeatedly cause environmental damage,” Sri Hartini stressed.
A similar situation is faced by Jambi Province, which has long been one of the areas with a high level of vulnerability to forest and land fires. Oscar Anugrah, Executive Director of WALHI Jambi, emphasized that the banking sector must not act merely as a provider of capital without taking responsibility for the impacts of its financing.
Every financing decision must ensure that it does not support forest destruction, violations of environmental law, or the dispossession of communities from their living spaces. According to him, the threat of El Niño during the 2026/2027 period could increase the risk of recurring forest and land fires in Jambi.
“Accountability in the financial sector is an important part of addressing the ecological crisis. Banks must ensure that the financing they provide does not worsen environmental destruction, but instead promotes fair and sustainable natural resource governance,” Oscar stressed.
Through the open letter, civil society organizations from various countries are calling on financial institutions to strengthen NDPE policies; ensure that all clients in high-risk sectors do not use fire or convert forests and peatlands; stop financing companies that fail to comply with these commitments; increase support for sustainable agricultural practices such as agroecology and agroforestry; and refrain from providing new financing, refinancing, or underwriting services to companies that have been legally found responsible for forest and land fires until all environmental restoration obligations have been fulfilled.
Note
- Mitsubishi UFJ Financial Group (MUFG) and Bank Danamon adopted a No Deforestation, No Peat, No Exploitation (NDPE) policy in 2021 for palm oil sector financing. A 2025 Rainforest Action Network (RAN) report found that Bank Danamon provided US$281 million in credit facilities to PT Tunas Baru Lampung Tbk (TBLA) between 2020 and 2022. The report states that TBLA converted nearly 7,800 hectares of peatland in South Sumatra. In 2023, fires occurred in two concessions managed by the company. Meanwhile, through Kayuagung District Court Decision No. 38/Pdt.Sus-LH/2024/PN Kag dated 16 June 2025, PT Dinamika Graha Sarana (PT DGS), a subsidiary of TBLA, was found liable for fires affecting 6,360 hectares of land. The court ordered the company to pay Rp184.39 billion in environmental compensation and carry out environmental restoration valued at approximately Rp1.79 trillion. TBLA had previously denied various allegations concerning the alleged destruction of peatlands.
Source: TUK Indonesia