Economic Pulse: Climate Investments and Financial Trends

In order to meet the 2030 climate targets, an estimated 4000 Trillion Indonesian Rupiah (amounting to around USD 243,600,000) is needed, highlighting the urgent need to pursue significant climate investments and close financing gaps.

As the fourth-most populous nation in the world, Indonesia happens to be the eight largest emitter of greenhouse gasses (GHG). The nation itself is a highly critical player in the global finance world because of the vital minerals stored in its rich earths and its strong geopolitical and geographical position, however it is a victim to the brutal effects of climate change. Jakarta, which is one of its most dense cities, has consistently ranked as the most environmentally vulnerable cities in the world to the impacts of climate change, being victim to massive floods, increasing temperature, and extreme weather (International Monetary Fund. Asia and Pacific Dept.).

The new 2030 climate targets Indonesia submitted to the United Nations in 2021 was accompanied by a new long-term strategy indicating net-zero GHG emissions by the year 2060, or sooner; questions arise regarding the GHG targets that stayed the same as the 2016 submission (“STATEMENT: Indonesia Submits New 2030 Climate Targets and First Long-Term Climate Strategy”). Additionally, earlier this year, President Prabowo Subianto highlighted Indonesia’s commitment to achieve 100% renewable energy in the next decade and in lieu of this, the government has announced that they plan to mobilise these climate finance and innovative green bonds. This positive statement generally sends a strong signal regarding the direction of Indonesia’s policy, but what tangible progress has been completed so far?

According to Indonesia’s Deputy Minister of Environment Diaz Hendropriyono earlier this year in August, his division cannot rely solely on the allocation from the state budget that recently went through an efficiency leading to them resorting to international funding (Antara). His statement alone suggests a major issue: a large lack of funds where large commitments are made. On the contrary, major Indonesian banks including Bank Rakyat Indonesia, Bank Central Asia, and Bank Mandiri have committed significant portions of their portfolios to green lending, with renewable energy and sustainable agriculture projects receiving priority funding. Moreover, Indonesian investors show large enthusiasm for sustainable investments, with 81% expressing favorable views toward Environmental, Social, Governance (ESG) principles, being the highest rate in Asia. This investor appetite can be translated into tangible capital flows, particularly in sectors aligned with Indonesia's 23% renewable energy target by 2025.

Indonesia's unique position as both a commodity powerhouse and emerging climate finance hub creates a variety of investment opportunities. As of 2025, just over half of private climate finance in Indonesia is actually invested in renewable energy with the government taking steps to incentivize this climate-friendly investments. An example of these investments include a partial or full corporate income tax holiday, depending on the amount of investments in green projects. The country's leadership in ASEAN climate finance initiatives, combined with its strategic partnerships with international development banks, is creating new pathways for blended finance solutions and Indonesia is positioning itself to capture a larger share through its proven track record in Green Sukuk innovation and growing institutional capacity. Commonly used to appeal to a large pool of investors, a sukuk is a certificate provided to an owner of an asset that awards them with ownership so it would not be considered a debt. It is utilized by the government for a large majority of things such as channeling the funds into “sustainable development” projects, but due to the wide scope of that definition, it often is used for things other than clean energy illustrating how the green infrastructure framework in Indonesia is still extremely broad.

A large intersection between economic development and sustainability. Hence by overcoming the lack of funds from the state budget, and other various other hurdles will forge a new pathway for new jobs in the economy and attract billions in new investment. Climate action itself is an opportunity by and accelerating Indonesia’s clean energy transition amongst other climate related movements, will open the way for new investments. The convergence of economic necessity and environmental urgency will aid in reshaping Indonesia's financial landscape, creating unprecedented opportunities for sustainable growth while addressing the critical financing gaps that must be closed to achieve 2030 climate targets.

Works Cited

Antara. “Indonesia Needs Rp4,000 Trln for Climate Action until 2030.” Antara News, ANTARA, 8 Aug. 2025, en.antaranews.com/news/372165/indonesia-needs-rp4000-trln-for-climate-action-until-2030. Accessed 7 Sept. 2025.

International Monetary Fund. Asia and Pacific Dept. “Indonesia: Selected Issues.” IMF Staff Country Reports, vol. 2022, no. 085, 22 Mar. 2022, www.elibrary.imf.org/view/journals/002/2022/085/article-A004-en.xml#A004fn02, https://doi.org/10.5089/9798400204050.002.A004. Accessed 7 Sept. 2025.

“STATEMENT: Indonesia Submits New 2030 Climate Targets and First Long-Term Climate Strategy.” Www.wri.org, 23 July 2021, www.wri.org/news/statement-indonesia-submits-new-2030-climate-targets-and-first-long-term-climate-strategy.