Heaptalk, Jakarta — The Financial Services Authority (OJK) is collaborating with the Australian Embassy and Prospera (Australia Indonesia Partnership for Economic Development) to develop climate risk management for the banking industry in Indonesia.
This two-year partnership follows the issuance of the Climate Risk Management and Scenario Analysis (CRMS) Guide in March 2024. This initiative is expected to support the development of policies related to climate risk in the banking sector to address challenges in developing climate risk, which include limitations in emission data and disaster data, as well as capacity and expertise in building climate risk impact calculation methodologies.
Dian Ediana Rae, Chief Executive of Banking Supervision at OJK, stated that the established partnership would strengthen relations between Australia and Indonesia in facing future climate risk challenges and opportunities.
Assisting the policy direction towards NZE
“We hope this collaboration will yield significant results, equipping banks with better guidance and data on Climate Risk Management while enabling Indonesia to conduct bank-wide climate impact assessments and develop regulatory frameworks to assess climate risk,” said Dian at the Kick-off Ceremony: OJK–Prospera–Moody’s Cooperation on Climate Risk Management Policy Development for the Indonesian Banking Sector in Jakarta (06/28).
Additionally, this cooperation is expected to support banks in developing, measuring, and mitigating climate impacts, ultimately assisting the policy direction towards Net Zero Emissions. The OJK and Prospera partnership encompasses six main areas as follows:
- Development of detailed climate risk management guidelines;
- Development of climate risk stress test scenarios for Indonesia based on the latest Network for Greening the Financial System (NGFS) scenarios;
- Development of methodologies for calculating the impact of climate risk on bank debtor performance for large companies and SMEs, as well as the impact on the bank’s financial performance (bottom-up stress test);
- Development of projections for physical and transition risks tailored to Indonesian conditions until 2100;
- Calculation of the impact of climate risk on the performance of the banking industry from a regulatory perspective (Climate Impact Assessment for Banking Industry Wide);
- Conducting capacity building for OJK and banks related to the development of Climate Risk Management.
