Closing the Climate Finance Gap: Indonesia’s Ministry of Finance and Green Finance Institute, UK, Develop Governance Blueprint for the Sustainable Finance Committee 

by Green Finance Institute | May 12, 2025

Jakarta, 12 May 2025 – The Ministry of Finance, OJK, and Bank Indonesia are working to establish the Sustainable Finance Committee (SFC), as mandated by Law No. 4/2023, and are currently drafting a supporting government regulation. The Green Finance Institute (GFI), a globally recognised financial institution and expert in green finance, supported by the UK Foreign, Commonwealth and Development Office’s Financial Services Centres of Expertise programme, has taken on a strategic role in Indonesia by working with the Ministry of Finance to develop a White Paper. This document will propose the governance structure for the Sustainable Finance Committee and outline how the Committee can play a key role in mobilising finance for sustainable projects in Indonesia.

The White Paper, which is disseminated on Friday, May 9, in Jakarta alongside stakeholders from Indonesia’s sustainable finance ecosystem, sets forth proposals on how the SFC could be structured to better coordinate and advance the national sustainable finance agenda. It aims to boost investor confidence and channel greater flows of capital into decarbonisation initiatives. Indonesia is at a pivotal moment in its sustainable finance transition, striving to balance the goals of strong economic growth and broad job creation with its international commitments to address climate change.

While there has been progress, the primary challenge remains the substantial financing gap. According to the Climate Budget Tagging (CBT) Report by the Ministry of Finance (MoF) covering 2018–2023, the average annual allocation for climate-related activities was around 3.2% of the national budget, equivalent to IDR 89.2 trillion (approximately US$5.9 billion) per year. By 2023, the total public spending on climate-related initiatives reached IDR 702.9 trillion (US$46.9 billion) (MoF, 2025). However, this public contribution accounts for only 16.4% of the total investment required to achieve Indonesia’s Nationally Determined Contributions (NDCs) targets, leaving a significant 83.6% gap that is expected to be covered through private and international financing sources (MoF, 2025). “Given this significant gap, mobilising private sector investment is critical,” emphasised Dr. Adi Budiarso, Head of the Policy Centre for the Financial Sector at the Fiscal Policy Agency, Ministry of Finance. 

“Indonesia faces the critical challenge of sustaining economic growth while building climate resilience and meeting NDC commitments. The scale of investment required far exceeds what public finance can provide. Private capital stands ready, but we must dismantle the barriers that prevent its deployment. GFI’s focus is on strengthening public investment strategies and designing the policy framework to mobilise billions of dollars needed to build a resilient, zero-carbon economy and accelerate sustainable development,” said Simon Horner, Managing Director at the Green Finance Institute. 

Before developing the White Paper, GFI conducted a study in 2024 titled Investors’ View on Sustainable Finance in Indonesia, intended to guide the Ministry of Finance of Indonesia in efforts to mobilise climate finance from private sectors. The report highlights major obstacles to private sector investment and proposes governance and institutional reforms to overcome them. This research became the key reference for the White Paper, providing a framework to align policy, regulatory measures, development financing, and project development, while also illustrating how the SFC can be structured to build greater investor confidence.

Key recommendations in the White Paper includes the establishment of investment platforms, which allow private investors to engage more effectiveldiy, gain greater visibility into investment pathways, access policy support, and blended finance opportunities. The private sector includes stakeholders such as banks, investors, financial institutions, industry, and project developers. Through SFC, green projects can be accelerated, with the goal of uniting public and private stakeholders to raise awareness of opportunities in decarbonisation.

To support the development of sustainable finance, GFI has also been working in parallel with PT Sarana Multi Infrastruktur (PT SMI). PT SMI plays a central role in supporting Indonesia’s sustainable energy transition. As a state-owned enterprise (SOE) under the Ministry of Finance, PT SMI serves as a catalyst in infrastructure development, including the renewable energy sector.

Dr. Adi Budiarso, Head of the Policy Centre for the Financial Sector at the Fiscal Policy Agency, Ministry of Finance, explained: “Despite ongoing progress, a major challenge remains—the substantial financing gap. According to the Ministry of Finance’s Climate Budget Tagging (CBT) Report for 2018–2023, the average annual allocation for climate-related programmes was around 3.2% of the national budget, equal to IDR 89.2 trillion (approximately US$5.9 billion) per year. By 2023, total public spending in this area had reached IDR 702.9 trillion (US$46.9 billion). However, this only accounts for 16.4% of the total investment needed to meet Indonesia’s NDCs targets, with the remaining 83.6% expected to come from private and international sources (MoF, 2025).  Given the size of this gap, mobilising private sector investment is essential. In this context, GFI’s initiative makes a significant contribution to Indonesia’s efforts.”

Rachel Kyte, UK Special Representative for Climate, said “Mobilising private capital at scale is essential if we are to meet the urgent challenges of climate change and build resilient economies and societies. Indonesia’s leadership in working towards the establishment of the Sustainable Finance Committee is a critical step forward. The Green Finance Institute is helping to achieve this ambition, and the UK Government has been glad to support their work, which complements our wider partnership with Government of Indonesia on the sustainable finance agenda. By strengthening governance and creating a clear path for investment, Indonesia is sending a powerful signal to investors worldwide that it is serious about building a resilient, low-carbon economy. The UK stands ready to support Indonesia in delivering on this vision.”