Climate change shaping investment trends: Finance Ministry

Jakarta (ANTARA) - Climate change is increasingly dictating global investment decisions as investors reckon with the transition and physical risks it brings, according to the Acting Director General of Financial Sector Stability and Development of the Finance Ministry, Herman Saheruddin.

He stated that those transition risks rise as countries race to adopt green technologies, enforce stricter carbon regulations, and shift consumer preferences toward sustainable products.

"These developments affect investment decisions, trade competitiveness, financing needs, fiscal revenues, and ultimately financial sector stability," Herman Saheruddin said here on Tuesday.

Meanwhile, the physical threats of climate change include floods, droughts, rising sea levels, and extreme weather which disrupt infrastructure development, agricultural yields, and economic productivity.

"For Indonesia, the economic consequences are significant. Climate change could generate substantial economic losses while reducing labor productivity if no meaningful action is taken," he noted.

In response to these challenges, the Indonesian government has integrated global sustainable development goals into its national agenda through Asta Cita – the government’s eight-point strategic vision.

The framework moves beyond raw economic growth to prioritize national resilience, market competitiveness, environmental sustainability, and equitable development.

Thus, fiscal policy will play a strategic role in mobilizing green investments, securing food, energy, and water resources, and fostering innovation for future industries, Herman added.

However, the government acknowledges that state funds alone are insufficient to meet the country’s climate commitments.

Between 2018 and 2024, the national state budget (APBN) covered just 12.9 percent of the total funds needed for climate mitigation. This leaves a massive 87.1 percent financing gap, with Indonesia requiring an average of Rp73.5 trillion in climate spending annually.

To bridge this shortfall, the Ministry of Finance is working to expand innovative financing instruments and strengthen partnerships with the private sector and international development agencies.

"Ultimately, sustainable finance is not merely an environmental commitment. It is a very important instrument for delivering Indonesia's vision of becoming an advanced economy by 2045," Herman stated.

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Translator: Uyu Septiyati Liman

Editor: Azis Kurmala

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