JAKARTA--On 9th ~ 14th October 2018, the Chairman of INSA Johnson W. Sutjipto and the General Treasurer of INSA Siana A. Surya had the opportunity to participate in the 2018 Annual Meetings of the International Monetary Fund IMF and World Bank Group, Bali hosted by Indonesian Government for the first time in the history.
Among many of seminars conducting during the conference “Scaling up Green Finance – the new role of Regulators and Central Banks” amongst others caught our attention.
This talk was chaired by Mr. Martin Wolf (Chief Economic Commentator at Financial Times, London). Participants are Mr. Mark Carney (Governor of Bank of England); Mr. Henrik Braconier (Head of the Financial Stability Department of Sveriges Riksbank); Mr. Francois Villeroy De Galhau (Governor of Bank of France); Mdm. Nor Shamsiah Mohd Yunus (Governor of the Central Bank of Malaysia); Mdm. Nezha Hayat (Chairperson of the Moroccan Capital Market Authority (AMMC)); Mr. Joaquin Levy, (Managing Director and World Bank Group Chief Financial Officer).
The keynote speaker was from Chairman of OJK, Mr. Wimboh Santoso represented by Ir. Hoesen M.M.
The Central Banks and Supervisors Network for Greening the Financial System (NGFS), was launched at the Paris One Planet Summit on 12 December 2017. The talk in Bali evolved the new role of regulators and central banks worldwide in the context of how to support green financing in the near future in order to achieve Paris agreement of
“well below 2o Celsius”.
It was announced that with the Bank Negara Malaysia joining on October 11th, the NGFS now has 19 members and 5 observers. This is a good sign indicating more countries are willing to commit towards making this goal a success.
The topic centralized around
“climate risk is financial risk”.
Present statistic shows that:
- Extreme weather has increased 3 folds in the past 3 decades, costing 5 times on physical risk and transition risk (due to uncertainty).
- Property insurance and re-insurance are exposed to higher risk due to climate risk.
- Banks in UK has a portfolio of u$11trillion (4 years average), 70% view climate risk as financial risk. Thus pension funds and fund managers are now revisiting their existing portfolio.
Mid term (2015~2019) and long term (2015~2024) sustainable loan road map plans are agreed upon by countries and NGFS to improve financial industry towards resilience and growth towards public loan and national agreement against climate change (carbon economy). Such as imposing no more than u$10mil loan shall be extended to environmentally unfriendly projects.
Indonesia is a member of G20 has also shown its commitment in Pittsburgh Summit in 2009 to reduce greenhouse gas emission by 2020.
Although Indonesia still needs high energy to get out of poverty, Otoritas Jasa Keuangan (OJK) representing Indonesia still stays committed towards reducing greenhouse gas emission by
- POJK 51 in 2017 stating that all financial institution must contribute towards conservation funds starting 1st January 2019 whereas all listed companies are given a choice decide whether to contribute or not.
- POJK 60 in 2017 stating rules and regulations in issuance of Green Bonds and Green Sukuks towards environ-mentally friendly projects or companies
- Regulating banks need to focus on sustainable loans for Indonesian companies starting 2018.
- Encouraging capital market (non banking) in Indonesia to focus on Green Bonds and Green Sukuk, green insurance products starting 2020
Malaysia also stated their commitment.
- Had started green technology finance since 2010. Presently 7 Green Sukuks already in existence for solar energy projects and buildings.
- Targeting 2030 for green finance to be the main stream of finance via Green Sukuk to include climate as a major criteria to provide incentives to green industry while penalizing non sustainable industries.
Morocco had started to fight climate change 20 years ago by:
- Providing funds to renewable energy since 2008.
- Targeting to replace existing energy production by:
- 20% of new energy projects by 2020
- 52% renewable energy projects by 2030
- Promoting capital market to finance green projects such as solar power (IFC helped to guide Green Bond in Africa 2017).
3 key major issues were highlighted during the talk.
- How to change mind set of “climate change to financial change risk”
- Dynamic green finance
- Access long term loan to incorporate long term view.
This requires major paradigm shift of mind set of everyone around the world.
It is clear now that the industry sector is pushing for incentive base to achieve “go green” target while governmental bodies are looking at penalties, eg “brown tax”. The dilemma is how to measure “brown vs green”? Is it sufficient just to base on risk base? IMF is now trying out stress tests to determine what are the options available.
It is known that 90% of the poverty population are in high risk climate change areas, hence, the only way ahead will be for
- More disclosure on portfolios. NGFS also admits that good data collection is key, hence, proposing to escalate voluntary disclosure to mandatory disclosure for non-banking portfolio to central banks.
- Prudential regulations based on the risk sensitivity and evidence of the macro prudential benefits of green assets in reducing the probability of the climate-related risks
- Clearer and more stringent public policies
Regardless of the present status worldwide, one conclusion has been reached, ie, “Go Green” is a must, hence sustainability will be the main criteria for financing. Thus Green bonds or Green Sukuks will be the major in the future for fixed return capital market for local currencies and infrastructures.
As maritime industry is very capital intensive, therefore, it’s imperative for the industry to move towards Green Ships for survival in the longer term.
- By admin
- 05 Nov 2018