In collaboration with Tembusu Asia Consulting and Evercomm

The global financial sector is at a pivotal juncture. With climate change accelerating and regulatory pressures mounting, financial institutions must urgently address their financed emissions—the greenhouse gas emissions tied to their lending and investment portfolios. In Indonesia and across the Asia-Pacific region, this shift is gaining momentum, driven by frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and initiatives such as the Partnership for Carbon Accounting Financials (PCAF)

The Regulatory Imperative: From Voluntary to Mandatory

Financial institutions can no longer treat sustainability as a side project. Regulatory bodies like Indonesian Financial Services Authority (Otoritas Jasa Keuangan or OJK) are tightening disclosure requirements, with mandatory climate-related reporting on the horizon. PCAF’s open-source methodologies are becoming the gold standard for measuring financed emissions, enabling cross-border consistency

Demystifying Financed Emissions: Why They Matter

Financed emissions account for up to 700 times a bank’s operational carbon footprint, according to PCAF. Yet, many institutions still lack the tools to measure them accurately. “You can’t manage what you don’t measure”. Everyone needs a real-world case where AI-driven analytics reduced a company’ portfolio emissions. For institutions lagging behind, the message is clear: adapt or face reputational and regulatory risks

The strategic decarbonization should go beyond risk mitigation. “Climate alignment isn’t a cost—it’s an opportunity.” Those instances are included:

1. Green bonds and transition financing, which are outperforming conventional assets in emerging markets

2. Carbon credit mechanisms, such as the coal-decarbonization project, which blends financial returns with measurable impact

The Role of Technology in Scaling Sustainable Finance

Advancements in technology are proving to be a game-changer for financial institutions navigating the sustainable finance landscape. AI-powered analytics, blockchain for transparent carbon credit trading, and IoT-enabled real-time emissions tracking are revolutionizing how institutions measure and manage their environmental impact

Exemplifies this shift—enabling banks to automate emissions calculations and identify high-risk assets with precision. “The integration of fintech and climate tech isn’t optional anymore; it’s the backbone of credible decarbonization.” As these tools become more accessible, even smaller regional banks can leverage data-driven strategies to stay competitive in a market increasingly skewed toward sustainability

Global Implications: Indonesia as a Regional Leader

Indonesia’s proactive stance on sustainable finance positions it as a potential leader in the Asia-Pacific region. With the key stakeholders in regulatory and advocacy, the country is creating a blueprint for emerging markets to balance economic growth with climate accountability. As global investors turn their attention to markets with robust ESG policies, Indonesia’s early moves could attract green capital and spur regional collaboration

For institutions in Indonesia and globally, the choice isn’t between profit and planet—it’s about leveraging sustainability as a driver of long-term value. As regulations harden and stakeholders demand accountability, the challenge and opportunity lie in scaling these efforts beyond rhetoric into measurable outcomes

Featuring Industry Experts

As an international strategic arm of the Indonesian government, Kadin Indonesia in collaboration with Tembusu Asia Consulting and Evercomm successfully held the Sustainable Finance Forum with the topic of Banking on Change: A Roadmap for a Climate-Aligned Future for Financial Institutions on 19 June 2025 at JS Luwansa Hotel, Jakarta

We explored the importance of decarbonization in navigating, measuring, and managing climate risk scenarios through a sustainable finance solution for financial institutions by inviting the board of Indonesian Financial Services Authority (Otoritas Jasa Keuangan or OJK) and Partnership for Carbon Accounting Financials (PCAF) as the industry experts to address the regulatory landscape and disclosure requirements in designing approaches that apply to any financial institution

Written by Kadin Business Service Desk