Sustainable Finance in the Indonesian Stock Market: A Narrative Review
Main Article Content
Abstract
Sustainable finance has become a significant focus in Indonesia’s financial sector, aligning economic growth with environmental and social objectives. This narrative review examines the development of sustainable finance in the Indonesian stock market through four key pillars: green products, green services, green financing, and green investment. We highlight government policy developments – including the Financial Services Authority’s (OJK) landmark regulations (POJK 51/2017 and POJK 60/2017), the Indonesian Sustainable Finance Roadmap, and the Indonesia Taxonomy for Sustainable Finance (TKBI) – which have laid the groundwork for integrating Environmental, Social, and Governance (ESG) principles. We also explore the introduction of ESG stock indices (such as SRI-KEHATI and the IDX ESG series) and the launch of a carbon trading exchange (IDXCarbon) as new market mechanisms. Furthermore, we discuss corporate responses to these initiatives, such as mandatory sustainability reporting and green bond issuance, and the reaction of investors through ESG-driven investment strategies. Our findings indicate that Indonesia has made notable progress, becoming a regional leader in green finance, though challenges remain in fully aligning financial practices with sustainability goals. We conclude with an overview of the current state of sustainable finance in Indonesia’s capital market and suggestions for future improvements.
Downloads
Article Details
Section
This work is licensed under a Creative Commons Attribution 4.0 International License.
How to Cite
References
Creswell, J. W., & Poth, C. N. (2016). Qualitative inquiry and research design: Choosing among five approaches. Sage publications.
Asian Development Bank. (2022). Green Bond Market Survey for Indonesia: Insights on the Perspectives of Institutional Investors and Underwriters. Asian Development Bank Publications.
Climate Policy Initiative (Larasati, L. K., & Mafira, T.). (2022). Are Indonesian Banks Ready to Account Climate-related Matters? Climate Policy Initiative Report, December 2022[10][66].
IEEFA (Iyer, R. N.). (2024, February 27). Will the new Indonesian Taxonomy for Sustainable Finance really serve its national interest? Institute for Energy Economics and Financial Analysis[25][29].
Indonesia Financial Group (IFG) Progress. (2024). Snapshot of ESG Investing in Indonesia’s Stock and Bond Market (IFG Progress Digest, Issue 20, August 27, 2024) by I. K. Rohman, F. J. D. Setiawan, & E. G. P. Ginting[9][43].
Jakarta Post. (2021, December 23). Responsible investment on rise as IDX launches ESG-based indexes. The Jakarta Post (Business Section).
KEHATI Foundation. (2021). ESG Sector Leaders IDX KEHATI Index Launched. Press Release, 20 December 2021[45][46].
Ministry of Environment and Forestry (MoEF). (2022). Indonesia’s Enhanced Nationally Determined Contribution (NDC). Government of Indonesia (as referenced in S&P Global Commodity Insights, 2025)[1].
Norton Rose Fulbright (Panggabean, K., Purba, J., & Thareq, Y.). (2023, October). Indonesia launched its first carbon exchange market. Legal Update, Norton Rose Fulbright[11][57].
Otoritas Jasa Keuangan (OJK). (2017a). Regulation No. 51/POJK.03/2017 on the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies[3][14].
Otoritas Jasa Keuangan (OJK). (2017b). Regulation No. 60/POJK.04/2017 on the Issuance and Terms of Green Bonds[16][81].
Otoritas Jasa Keuangan (OJK). (2021). Sustainable Finance Roadmap Phase II (2021–2025)[6][82].
Otoritas Jasa Keuangan (OJK). (2022). Taksonomi Hijau Indonesia (Indonesia Taxonomy for Sustainable Finance) Version 1.0. OJK Publication[27].
Otoritas Jasa Keuangan (OJK). (2023a). Regulation No. 14/POJK.04/2023 on Carbon Trading through Carbon Exchange[30][55].
Otoritas Jasa Keuangan (OJK). (2023b). Regulation No. 18/POJK.04/2023 on Issuance and Requirements for Bonds and Sukuk Based on Sustainability[35].
Prisandy, R. F., & Widyaningrum, W. (2022). Green Bonds in Indonesia: The Challenges and Opportunities. In Indonesia Post-Pandemic Outlook: Rethinking Health and Economics Post-COVID-19 (pp. 259–278). BRIN Publishing[49][50].
S&P Global Commodity Insights. (2025, January 20). Indonesia launches international carbon trading on IDX with five power plants[12][1].
Sustainalytics/IDX. (2020). IDX ESG Leaders Index Methodology & Guide (Version 1.1). Indonesia Stock Exchange publication[39][41].
United Nations Development Programme (UNDP). (2018, October 16). Indonesia’s Green Bond & Sukuk Initiative[4][51].
Gutiérrez-Ponce, H., & Wibowo, S. A. (2023). Sustainability Reports and Disclosure of the Sustainable Development Goals (SDGs): Evidence from Indonesian Listed Companies. Sustainability, 15(24), 16919[2][63]