Greenwashing in the Financial Services Industry - Resident Coordinator's Speech, GIta Sabharwal

Bapak Mirza Adityaswara, Vice-Chairperson, Board of Commissioners, OJK

Bapak Agus Sugiarto, Head of OJK Institute

From OJK Institute: 

• Bapak Fakhri Hilmi, Senior Advisor
• Bapak Saut Simanjuntak, Advisor 
• Bapak Mulia Simatupang, Senior Executive Researcher

Bapak Satrya Wibawa, UNEP FI

Ibu Lany Harijanti, GRI

Ibu Prabandari Moerti (Murti), Deloitte 

Ibu Ariavita Purnamasari, HSBC

Let me begin by thanking OJK for your vision to address challenges of greenwashing in Indonesia. 

This forward-looking approach speaks to Indonesia’s leadership on sustainable and green transformation in alignment with the SDGs. 

Standardising ESG metrics across the financial services industry, including bankers, asset managers, investors and insurers, amongst others, is critical to develop a comprehensive understanding of green washing in today’s economic context. 

The principles adopted in Indonesia can influence similar agendas far beyond the country’s borders, setting regional transformations in motion. 

Greenwashing remains widespread, misleading stakeholders about the environmental benefits of financial products and services. 

This undermines sustainability efforts and erodes trust in green finance as terms like carbon neutral and net zero are used widely while lacking universally agreed definitions.

At the same time, a diversity of standards creates confusion and reduces the ability of the financial services industry to accurately and robustly monitor ESG gains and mitigate greenwashing.

This is hardly unique to ASEAN. Even in the European Union 230 sustainability and 100 green energy labels exist with different levels of transparency. 

Research by the European Commission tells us that more than half of green claims give vague, misleading or unfounded information. 

Simultaneously, four in ten of the claims have no supporting evidence and half of all green labels offer weak or non-existent verification. 

Research by OJK together with UNEP FI premised on a robust analysis identifies potential sources of greenwashing in Indonesia’s financial sector. 

The new evidence base generated can inform the regulatory framework by defining greenwashing to support standardizing practices through greater transparency, accuracy in ESG disclosures and process of verification. 

This is essential as fragmented regulations on sustainable finance has resulted in regulatory gaps on green bonds, ESG funds, carbon credits and other financial products.

Compounding these gaps are persisting ambiguities in terminology with inconsistency of ESG rating and sustainability reporting across providers. This adds to the complexity of verification of sustainability linked financial products. 

This is where global benchmarks like UN’s PRB can prove useful. These are frameworks that can be locally adapted to make them more fit for purpose for Indonesia. 

Overcoming these challenges will require the leadership of OJK. 

It is about strengthening monitoring systems, introducing third-party verification and enhancing investor knowledge of ESG. 

Steps towards standardisation of ESG metrics will translate into increased investments into ESG products and projects from the domestic and international markets contributing to Indonesia’s ambitious growth trajectory as set out by the Government.     

Today we are taking an important stride towards understanding and examining greenwashing comprehensively.

The partnership between OJK and UNEP FI will yield dividends, as we jointly work towards solutions. 

I am very much looking forward to your insights.

Thank you.