Indonesia's Green Business Financing Needs Deeper Bank Involvement

Financing green initiatives requires more than just capital, according to Bank DBS Indonesia. The bank believes lenders must actively assist companies in preparing their sustainability projects and structuring financing to align with commercial viability.

This perspective emerges from a joint research report by Bank DBS Indonesia and Tenggara Strategics, titled "The Sustainability Shift: Indonesia's Industrial Landscape in Five Key Sectors, Opportunities and Risks." The study examines five strategic sectors in Indonesia: energy-infrastructure, technology-media-telecommunications, food-agribusiness, health-pharmaceuticals, and metals-mining.

Director of Institutional Banking Group at PT Bank DBS Indonesia, Anthonius Sehonamin, stated that the transition to sustainable business models demands sector-specific approaches. "The shift towards more sustainable business does not have a single path in every sector," he said. "Through this research, Bank DBS Indonesia seeks to provide more targeted insights into the changes occurring across various strategic sectors."

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Bank also needs to help companies prepare projects, determine financing structures, and find solutions that reconcile sustainability targets with commercial feasibility.

DBS emphasizes that sustainability opportunities must be technically and financially ready projects. Consequently, financing instruments must be tailored to each sector's characteristics and risks. The bank offers a range of financing options, including sustainability financing, sustainability-linked financing, structured and blended finance, business lending, trade finance, and supply chain financing, complemented by advisory services to guide corporate transformations.

In the energy and infrastructure sector, the growing demand for electricity presents significant opportunities but requires substantial investment. Indonesia's electricity consumption is projected to surge from approximately 300 TWh in 2024 to over 1,800 TWh by 2060. While the country possesses vast renewable energy potential, estimated at around 3,687 gigawatts, its utilization remains below 0.5 percent. Challenges related to transmission and project bankability need to be addressed. DBS Indonesia reports supporting renewable energy projects, including geothermal, and green financing for electric vehicle ecosystems and battery swapping infrastructure.

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The shift towards more sustainable business does not have a single path in every sector. Through this research, Bank DBS Indonesia seeks to provide more targeted insights into the changes occurring across various strategic sectors.