REGULATION OF FINANCIAL SERVICES AUTHORITY

NO. 51/POJK.03/2017

ON

APPLICATION OF SUSTAINABLE FINANCE

TO FINANCIAL SERVICES INSTITUTION, ISSUER AND PUBLICLY LISTED

COMPANIES

BY THE GRACE OF THE GOD ALMIGHTY

BOARD OF COMMISSIONER OF THE FINANCIAL SERVICES

AUTHORITY,

Considering: a. WHEREAS, to realise sustainable development capable of

maintaining economic stability and inclusive, it is necessary to
establish a national economic system upholding the harmony between
economic, social and environmental aspects;

b. WHEREAS, to drive the national economic system upholding

harmony between economic, social and environmental aspects
capable of maintaining economic stability and inclusive, sources are
necessary to provide sufficient funds;

c. WHEREAS, development of environmentally sound financial

institution system is instructed under Law 32 of 2009 on
Environmental Protection and Management;

d. WHEREAS, it is necessary to follow up the Roadmap of Indonesian

Sustainable Finance issued by the Financial Services Authority with
specific regulations binding all financial services agencies, issuers and
public companies;

e. WHEREAS, based on the considerations under point a to d hereof, it

is necessary to issue the Regulation of Financial Services Authority
on Application of Sustainable Finance to Financial Services
Institution, Issuer and Publicly Listed Company.

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In view of: 1. Law 7 of 1992 on Banking (State Gazette of the Republic of Indonesia
Year 1992 No. 31, Supplement of State Gazette of the Republic of
Indonesia No. 3472) as amended by Law 10 of 1998 on Amendment
of Law 7 of 1992 on Banking (State Gazette of the Republic of
Indonesia Year 1998 No. 182, Supplement of State Gazette of the
Republic of Indonesia No. 3790);

2. Law 11 of 1992 on Pension Fund (State Gazette of the Republic of

Indonesia Year 1992 No. 37, Supplement of State Gazette of the
Republic of Indonesia No. 3477);

3. Law 8 of 1995 on Capital Market (State Gazette of the Republic of

Indonesia Year 1995 No. 64, Supplement of State Gazette of the
Republic of Indonesia No. 3608);

4. Law 21 of 2008 on Islamic Banking (State Gazette of the Republic of

Indonesia Year 2008 No. 94, Supplement of State Gazette of the
Republic of Indonesia No. 4867);

5. Law 2 of 2009 on Indonesian Export Financing Institution (State

Gazette of the Republic of Indonesia Year 2009 No. 2 Supplement of
State Gazette of the Republic of Indonesia No. 4957);

6. Law 21 of 2011 on Financial Services Authority (State Gazette of the

Republic of Indonesia Year 2011 No. 111, Supplement of State
Gazette of the Republic of Indonesia No. 5253);

7. Law 24 of 2011 on Social Security Administrating Board (State

Gazette of the Republic of Indonesia Year 2011 No. 116, Supplement
of State Gazette of the Republic of Indonesia No. 5256);

8. Law 40 of 2014 on Insurance (State Gazette of the Republic of

Indonesia Year 2014 No. 337, Supplement of State Gazette of the
Republic of Indonesia No. 5618);

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 9. Law 1 of 2016 on Underwriting (State Gazette of the Republic of
Indonesia Year 2016 No. 9, Supplement of State Gazette of the
Republic of Indonesia No. 5835);

DECIDES TO:

Stipulate : REGULATION OF FINANCIAL SERVICES AUTHORITY ON

APPLICATION OF SUSTAINABLE FINANCE TO
FINANCIAL SERVICES INSTITUTION, ISSUER AND
PUBLICLY LISTED COMPANY.

SECTION I

GENERAL PROVISION

Article 1

The following definition shall apply hereto.

1. Financial Services Institution, hereinafter referred to as FSI, shall mean the

institution that implements activities in banking, capital market, insurance, pension
fund, financing institution and other financial services institutions.

2. Other Financial Services Institution shall include pawnshop, underwriting institution,

Indonesian Export Financing Institution, secondary mortgage company, and Social
Security Administrating Board as provided under laws and regulations on pawnshop,
underwriting, Indonesian export financing institution, secondary mortgage company
and social security administrating board.

3. Commercial Bank shall mean:

a. Commercial Bank under Law 7 of 1992 on Banking as amended by Law 10 of

1998 on Amendment of Law 7 of 1992 on Banking;

b. Islamic Commercial Bank under Law 21 of 2008 on Islamic Banking.

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4. Rural Credit Bank, hereinafter referred to as RCB, shall mean the Rural Credit Bank
under Law 7 of 1992 on Banking as amended by Law 10 of 1998 on Amendment of
Law 7 of 1992 on Banking.

5. Islamic Rural Financing Bank, hereinafter referred to as IRFB, shall mean the Islamic
Rural Financing Bank under Law 21 of 2008 on Islamic Banking.

6. Issuer shall mean the party that carries out public offering.

7. Publicly Listed Company shall mean company whose shares are already held by at
least three hundred (300) shareholders and retaining a paid-up capital of at least Three
Billion Indonesian Rupiahs (IDR 3,000,000,000) or otherwise another number of
shareholder and amount of paid-up capital provided under Government regulation.

8. Sustainable Finance shall mean comprehensive support from financial services sector
to create sustainable economic growth by harmonising economic, social and
environmental interests.

9. Environment shall mean the spatial unity that include all materials, forces,
circumstances and living beings including human beings along with their behaviour
that affect the nature itself, continuity of life, as well as the well-beings of humans
and other living beings.

10. Sustainable Financial Product and/or Service shall mean financial product and/or
service that integrate economic, social and environmental aspects, as well as the
governance within its features.

11. Sustainable Financial Action Plan shall mean written document containing FSI short
term (one year) and long term (five years) business plans and work programmes
relevant to the principles applied to Sustainable Finance, including strategy to realise
the said work plans and programmes according to the predetermined targets and
timeline, taking into account the principle of prudence and application of risk
management.

12. Corporate Social and Environmental Responsibilities, hereinafter referred to as

CSER, shall mean commitment to participate in sustainable economic development
to improve life and environmental quality favourable to the company itself, local
community and public in general.

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13. Sustainability Report shall mean report made public, containing economic, financial,
social and environmental performance of FSI, Issuer and Publicly Listed Company
in running sustainable business.

Article 2

(1) FSI, Issuer and Publicly Listed Company shall apply Sustainable Finance in their
business activities.

(2) Sustainable Finance application under paragraph (1) of this article hereof shall
implement the following:

a. responsible investment principle;

b. sustainable business strategy and practice principle;

c. social and environmental risk management principle;

d. governance principle;

e. informative communication principle;

f. inclusive principle;

g. priority sector development principle; and

h. coordination and collaboration principle.

Article 3

(1) Sustainable Finance application in case of FSI, Issuer and Publicly Listed Company
under Article 2 hereof shall:

a. take effect as of the date of 1 January 2019 for FSI in the form of a Commercial
Bank that is classified as a Commercial Banks - BUKU13, BUKU 4 and foreign
bank categories,

b. take effect as of the date of 1 January 2020 for FSI in the form of BUKU 1 and
BUKU 2, financing company, Islamic financing company, venture capital

1
OJK categorizes banks in Indonesia into 4 categories based on its equity:
BUKU 1 for banks with equity less than IDR 1 Trillion;
BUKU 2 for banks with equity between IDR 1 – 5 Trillion;
BUKU 3 for banks with equity between IDR 5 – 30 Trillion; and
BUKU 4 for banks with equity more than IDR 30 Trillion.
(This note is inserted to provide further clarification of the English version of the policy).

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 company, Islamic venture capital company, infrastructure financing company,
insurance company, Islamic insurance company, reinsurance company, Islamic
reinsurance company, Indonesian Export Financing Institution, secondary
mortgage company, Social Security Administering Board, Issuers other than
Issuers having small scale assets and Issuers having medium scale assets, and
Publicly Listed Company,;

c. take effect as of the date of 1 January 2022 for FSI in the form of RCB BUKU
3 including IRFB having a core capital equivalent to the BUKU 3 category,
securities company managing the securities account of its customers, and Issuers
having a medium scale asset;

d. to FSI taking form of BUKU 1 and BUKU 2, and IRFB with core capital equal
to BUKU 1 and BUKU 2, Issuer with small scale asset, securities company that
does not administer securities customer account, pawnshop company,
underwriting company, and Islamic underwriting company, take effect as of the
date of 1 January 2024; and

e. to FSI taking form of pension fund with total asset of at least One Trillion
Indonesian Rupiahs (IDR 1,000,000,000,000), take effect as of the date of 1
January 2025.

(2) In case the FSI under paragraph (1) of this article hereof is also Issuer or Publicly
Listed Company, its application of Sustainable Finance shall refer to one of the
applicable dates, whichever earliest.

SECTION II

APPLICATION OF SUSTAINABLE FINANCE

Article 4

(1) To apply the Sustainable Finance under Article 2.1 hereof, FSI shall prepare
Sustainable Finance Action Plan provided under Schedule I as an integral and
inseparable part hereof.

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(2) The Sustainable Finance Action Plan under paragraph (1) of this article hereof shall
be submitted on annual basis to the Financial Services Authority:

a. at the same time as business plan submission, in case of FSI required to submit
business plan as part of business plan or in separate document; and

b. on 31 January at the latest, in case of FSI not required to submit business plan.

(3) If the deadline of Sustainable Finance Action Plan under paragraph (2) of this article
hereof falls on Saturday, Sunday, or holiday, it shall be submitted on the next working
day.

(4) Sustainable Finance Action Plan shall be prepared by board of director and approved
by board of commissioner.

(5) FSI that is also Issuer or Publicly Listed Company shall be subject to the provision
under paragraph (1) to (4) of this article hereof.

Article 5

FSI shall effectively implement Sustainable Finance Action Plan.

Article 6

FSI shall communicate Sustainable Finance Action Plan to:

a. shareholders; and

b. all organisational levels within FSI.

Article 7

(1) The Sustainable Finance Action Plan under Article 4.1 hereof shall be prepared based
on each FSI priorities that cover at least the following:

a. development of Sustainable Finance Product and/or Service including increase

of financing portfolio, investment or placement on financial instruments or
projects in line with the Sustainable Finance application;

b. FSI internal capacity building; or

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 c. adjustment of FSI organisation, risk management, governance and/or standard
operating procedure in line with the principle of Sustainable Finance application.

(2) The Sustainable Finance Action Plan under paragraph (1) of this article hereof shall
include the application timeline.

Article 8

(1) FSI required to perform CSER shall allocate a portion of their CSER funds to support
Sustainable Finance application activities.

(2) Issuer and Publicly Listed Company that are not FSI but required to perform CSER
shall allocate a portion of their CSER funds to support Sustainable Finance
application activities.

(3) CSER fund allocation under paragraph (1) of this article hereof shall be set forth in
Sustainable Finance Action Plan.

(4) The use of CSER fund under paragraph (1) and (2) of this article hereof shall be
reported in Sustainability Report.

SECTION III

INCENTIVES

Article 9

(1) FSI, Issuer and Publicly Listed Company that effectively apply Sustainable Finance
may be incentivised by the Financial Services Authority.

(2) The incentive under paragraph (1) of this article hereof may take form of the
following:

a. engaging the FSI, Issuer and Publicly Listed Company in programmes of human
resources capacity building;

b. awarding with Sustainable Finance Award; and/or

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 c. other incentives.

SECTION IV

SUBMISSION OF SUSTAINABLE FINANCE ACTION PLAN,

REPORTING AND PUBLICATION

Article 10

(1) FSI, Issuer and Publicly Listed Company shall prepare Sustainability Report.

(2) The said Sustainability Report under paragraph (1) of this article hereof shall be made
as either separable or inseparable part of the annual report.

(3) The Sustainability Report under paragraph (1) of this article hereof shall be submitted
to the Financial Services Authority on annual basis, in accordance with the time limit
of annual report relevant to the respective FSI, Issuer and Publicly Listed Company.

(4) In case where FSI, Issuer and Publicly Listed Company submit their Sustainability
Report separately from the annual report, the Sustainability Report shall be submitted
annually to the Financial Services Authority at the latest 30 April of the next year.

(5) Where the time limit of the Sustainability Report submission under paragraph (4) of
this article hereof falls on Saturday, Sunday or holiday, the report shall be submitted
on the next working day.

(6) The initial submission of Sustainability Report shall be made for the following
reporting periods:

a. 1 January-31 December 2019 in case of FSIs in the form of BUKU 3, BUKU 4

and foreign bank;

b. 1 January-31 December 2020 in case of FSIs in the form of BUKU 1 and BUKU
2, financing company, Islamic financing company, venture capital company,
Islamic venture capital company, infrastructure financing company, insurance
company, Islamic insurance company, reinsurance company, Islamic
reinsurance company, Indonesian Export Financing Institution, secondary
mortgage company, Social Security Administering Board, Issuer excluding
Issuer with small and medium scale asset, and Publicly Listed Company.

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 c. 1 January-31 December 2022 in case of FSIs in the form of RCBBA 3 including
IRFB with core capital equal to BUKU 3, securities company that administers
securities customer account, and medium scale Issuer;

d. 1 January-31 December 2024 in case of FSIs in the form of BUKU 1 and BUKU
2, and IRFB with core capital equal to BUKU 1 and BUKU 2, Issuer with small
scale asset, securities company that does not administer securities customer
account, pawnshop company, underwriting company, and Islamic underwriting
company; and

e. 1 January-31 December 2025 in case of FSIs in the form of pension fund with
total asset of at least One Trillion Indonesian Rupiahs (IDR 1,000,000,000,000).

(7) Where the FSI under paragraph (1) of this article hereof is also Issuer or Publicly
Listed Company, its submission of initial Sustainability Report shall refer to one of
the applicable periods, whichever earliest.

(8) The Sustainable Report under paragraph (1) of this article hereof shall be prepared
using the format provided under Schedule II as an integral and inseparable part
hereof.

Article 11

The Sustainable Finance Action Plan under Article 4.1 hereof and the Sustainability
Report under Article 10.1 hereof shall be submitted offline to the Financial Services
Authority, subject to the following:

a. in case of bank FSI, shall be addressed to:

1. the relevant Supervision Department or Islamic Banking Department in case of

banks with principal office in the Special Capital Region of Jakarta, or foreign
banks with branch office in the said region; or

2. Regional Office or Office of the Financial Services Authority that supervises the
bank principal office;

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b. in case of FSI in the form of Securities Companies, Non-FSI Issuer and Non-FSI
Publicly Listed Company, shall be addressed to the relevant Department of Capital
Market Supervision;

c. in case of FSI in the form of financing company, Islamic financing company, venture
capital company, Islamic venture capital company, infrastructure financing
company, insurance company, Islamic insurance company, reinsurance company,
Islamic reinsurance company and pension fund, shall be addressed to the relevant
Department of Non-Bank Finance Industry Supervision; and

d. in case of other FSIs, shall be addressed to the relevant department in charge of

supervising them.

Article 12

(1) FSI, Issuer and Publicly Listed Company shall publish the Sustainability Report as
provided under Article 10.1 hereof.

(2) The Sustainability Report under paragraph (1) of this article hereof shall be published
to the FSI, Issuer and Publicly Listed Company websites at the latest on 30 April of
the next year.

(3) FSIs that are yet to have websites shall publish their Sustainability Report through
print media or other media easily accessible to public at the latest on 30 April of the
next year.

SECTION V

SANCTIONS

Article 13

(1) Any violation by FSI of the provisions under Article 2.1, Article 3-Article 7, Article
8.1, Article 10 and/or Article 12 hereof shall be punishable with administrative
sanctions in the form of written admonition or warning.

(2) Any violation by Non-FSI issuer and Non-FSI Publicly Listed Company of the
provisions under Article 2.1, Article 10 and/or Article 12 shall be punishable with
administrative sanctions in the form of written admonition or warning.

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 SECTION VI

CLOSING PROVISION

Article 14

This Financial Services Authority Regulation shall take effect as of the promulgation
date.

For public cognizance, this decree shall be announced by publishing it in the State Gazette
of the Republic of Indonesia.

Stipulated in Jakarta

on the date of July 18, 2017

CHAIRMAN OF THE BOARD OF COMMISSIONER

OF FINANCIAL SERVICES AUTHORITY

MULIAMAN D. HADAD

Promulgated in Jakarta

on the date of July 27, 2017

MINISTER OF LAW AND HUMAN RIGHTS

OF THE REPUBLIC OF INDONESIA,

YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NO. 169

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13
 SCHEDULE I

REGULATION OF FINANCIAL
SERVICES AUTHORITY

NO. 51/POJK.03/2017

ON APPLICATION OF SUSTAINABLE
FINANCE TO FINANCIAL SERVICES
INSTITUTION, ISSUER AND
PUBLICLY LISTED COMPANY

I. General

Sustainable Finance Action Plan must contain at least executive summary,

Sustainable Finance Action Planning process, Sustainable Finance Action Plan
determinants, Sustainable Finance Action Plan priority and description and
Sustainable Finance Action Plan follow up.

II. Executive Summary

This section contains the Sustainable Finance Action Plan description of at most
three (3) pages and covers at least the following:

1. Sustainable Finance Action Plan achievement;

2. vision and mission;

3. Sustainable Finance Action Plan objectives;

4. programmes to implement under the Sustainable Finance Action Plan including

1-year and 5-year timelines. Sustainable Finance Action Plan that involves a
period of up to five (5) years must be submitted once every five years;

5. allocation of resources (funding, human and cooperation partner) for the

Sustainable Finance Action Plan implementation; and

6. staff, officials or work unit responsible for Sustainable Finance Action Plan
implementation.

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III. Sustainable Finance Action Planning Process

Sustainable Finance Action Planning process must include statement covering at

least the participation in preparing the plan, along with the references used during
the plan preparation.

IV. Determinants of Sustainable Finance Action Planning Process

Determinants underlying the establishment of the Sustainable Finance Action Plan

objectives and priorities must include at least the following:

1. business strategic plan;

2. institutional capacity;

3. financial condition and technical capacity;

4. cooperation with external parties;

5. communication strategy;

6. monitoring, evaluation and mitigation systems; and

7. Governmental policies.

These determinants are elaborated based on their relationship to the Sustainable

Finance principle as well as strength and weakness analysis of these factors.

V. Sustainable Finance Action Plan Priorities and Description

FSI must set priorities of Sustainable Finance program implementation as provided

under Article 7 hereof.

See the following examples of action programmes for the implementation of

Sustainable Finance Action Plan.

1. 1st Programme: Improvement of Green Portfolio – Bank X

Complete point a to e below to elaborate work priorities.

a. Rationale

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 1) FSI selects 1st priority;

2) FSI explains the reason of making the 1st priority; and

3) FSI elaborates activities to implement against the 1st priority and

objectives.

b. Activity

Complete the table below with activities, implementation period, resources

required, and activity PIC. Activities are specifically and realistically
described.

No. Activity Description Initial Final Resources Activity

Period Period Required PIC

c. Resources

Complete this section with details on resources required to implement

Sustainable Finance Action Plan, including:

1) source of fund;

2) human resources; and

3) cooperation partners.

d. Programme Implementation Evaluation System

FSI should develop and mention a system to monitor the effectiveness of

the action programme implementation and achievement including short
and long term measures to take in case of problems in the implementation
and achievement.

FSI employs monitoring and evaluation mechanism for each action

programme, including monitoring and evaluation method and phases, as
well as measures to take in case of deviation between the action
programme and its realisation.

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 e. Challenges and Future Plan

Complete this part by elaborating the identified challenges and obstacles

likely to encounter in the action programme, as well as plans to implement
in order to sort out the challenges and obstacles.

2. 2nd Programme: (input programme type)

(template follows the 1st programme; replicate until the last programme)

VI. Follow Up of Sustainable Finance Action Plan

In this section, FSI elaborates the process in evaluating Sustainable Finance Action
Plan for further determining the follow up.

Monitoring and evaluation system for assessing progress in general includes the
following:

1. staff, official and/or work unit responsible for monitoring and evaluation;

2. reasonable timeline to measure the realisation of Sustainable Finance Action

Plan;

3. follow up of Sustainable Finance Action Plan; and

4. risk mitigation in case Sustainable Finance Action Plan cannot be appropriately

implemented or when the desired goals are not achieved.

Stipulated in Jakarta

on the date of July 18, 2017

CHAIRMAN OF THE BOARD OF COMMISSIONER

OF FINANCIAL SERVICES AUTHORITY

MULIAMAN D. HADAD

17
 SCHEDULE II

REGULATION OF FINANCIAL
SERVICES AUTHORITY

NO. 51/POJK.03/2017

ON APPLICATION OF SUSTAINABLE
FINANCE TO FINANCIAL SERVICES
INSTITUTION, ISSUER AND
PUBLICLY LISTED COMPANY

I. GENERAL

1. Sustainability Report may be made as either separable or inseparable part of

the annual report.

2. In case Sustainability Report is made separated from the annual report, it must
at least contain the following information:

a. sustainability strategy elaboration;

b. summary of sustainability aspects (economic, social and environmental);

c. brief profile of FSI, Issuer or Publicly Listed Company;

d. description on Board of Directors;

e. sustainability governance;

f. sustainability aspect performance

g. written verification from independent parties, if any;

h. feedback sheet for reader, if any; and

i. FSI, Issuer or Publicly Listed Company response to the previous year’s

feedback.

3. In case Sustainability Report is made integrated to the annual report, it must

contain information as mentioned in point 2 above.

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 4. Sustainability Report is made in Indonesian. When necessary, Indonesian and
English versions can be placed side by side.

5. Sustainability Report can be provided with figures, statistic, table and/or

diagram with clear notes and must be easily readable to the reader.

II. SUSTAINABILITY REPORT CONTENT

See the following elaboration of Sustainability Report content as mentioned by

section I point 2 above.

A. Sustainability Report must contain information as follow:

1. Elaboration on Sustainability Strategy

This section must contain elaboration on FSI, Issuer and Publicly Listed
Company sustainability strategy.

2. Summary of Sustainability Aspect Performance

This section must contain comparison of performances in the past three (3)
years (in case of FSI, Issuer and Publicly Listed Company having been
operational for more than three (3) years) involving the following
information:

a. economic aspect that must cover at least the following information:

1) quantity of products/services offered;

2) revenue or sales;

3) nett profit/loss;

4) environmental-friendly products; and

5) engagement of local stakeholders concerning the Sustainable

Finance business process;

b. environmental aspects that must cover at least the following

information:

1) energy consumption (including electricity and water);

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 2) total emission reduction (in case of FSI, Issuer and Publicly
Listed Company whose business process directly relates to
environment);

3) reduction of waste and effluent (waste entering the environment)

achieved (in case of FSI, Issuer and Publicly Listed Company
whose business process directly relates to environment); or

4) biodiversity conservation (in case of FSI, Issuer and Publicly

Listed Company whose business process directly relates to
environment);

c. Social aspects that must describe positive and negative impacts out of
Sustainable Finance application on community and environment
(including human, area and fund).

3. Brief profile on comprehensive description on FSI, Issuer, and Publicly

Listed Company characteristics. This part must include at least the
following information:

a. FSI, Issuer and Publicly Listed Company vision, mission and

sustainability values;

b. FSI, Issuer and Publicly Listed Company name, address, phone

number, fax number, email address and website, as well as their
branch and/or representative office;

c. FSI, Issuer and Publicly Listed Company business scale in brief,

including:

1) total asset or asset capitalisation and total liabilities (in million

IDR);

2) number of employee by sex, position, age, education and

employment status;

3) shareholding percentage (public and government); and

4) operational area;

d. short description on products, services and business activities;

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 e. membership in association;

f. significant changes in FSI, Issuer and Publicly Listed Company such

as those relating to branch office closure or opening and ownership
structure.

4. Description on Board of Directors that must include:

a. policy to respond challenges in keeping up with the sustainability

strategy, that must cover at least the following:

1) elaboration on FSI, Issuer and Publicly Listed Company

sustainability values;

2) elaboration on FSI, Issuer and Publicly Listed Company

responses towards issues concerning Sustainable Finance
application;

3) elaboration on commitment of FSI, Issuer and Publicly Listed

Company leadership in achieving Sustainable Finance
application;

4) achievement of Sustainable Finance application performance;

and

5) challenges in Sustainable Finance application performance

achievement;

b. application of Sustainable Finance that must cover at least the

following:

1) achievement of Sustainable Finance application (economic,

social and environmental aspects) against targets; and

2) elaboration on achievement and challenges including notable

moments during the reporting period (in case of FSI required to
make Sustainable Finance Action Plan);

c. target achievement strategy that must include at least the following:

1) risks management due to the application of Sustainable Finance

concerning economic, social and environmental aspects);

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 2) seizure of business opportunity and prospect; and

3) description on economic, social and environmental external

situations that may potentially affect FSI, Issuer and Publicly
Listed Company sustainability.

5. Sustainability governance that must include:

a. description of tasks performed by Board of Directors and Board of

Commissioners, employee, official and/or work unit responsible for
the application of Sustainable Finance;

b. elaboration on competence development for members of Board of

Directors and Boards of Commissioners, employee, official and/or
work unit responsible for the application of Sustainable Finance;

c. elaboration on procedure that FSI, Issuer and Publicly Listed Company

applies in identifying, measuring, monitoring and controlling risks out
of the application of Sustainable Finance relating to economic, social
and environmental aspects, including roles of Board of Directors and
Board of Commissioners in managing, carrying out regular review
towards, and analysing the effectiveness of FSI, Issuer and Publicly
Listed Company risk management process;

d. description on stakeholders that includes:

1) involvedness of stakeholders based on output of assessment over

management, General Meeting of Shareholders (GMS), decision
letters or others; and

2) FSI, Issuer and Publicly Listed Company approach in engaging

stakeholders in the application of Sustainable Finance, such as
through discussion, survey and seminar.

e. Problems faced, progress and influence to the application of

Sustainable Finance.

6. Sustainability criteria that must include at least the following:

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a. Elaboration on sustainable culture development activities in the
internal of FSI, Issuer and Publicly Listed Company.

b. Elaboration on economic performance in the past three (3) years

including:

1) comparison of target to performance of production, portfolio,

financing target, or investment, revenue and profit/loss in case
Sustainability Report is prepared separately from the Annual
Report; and

2) comparison of target to performance of portfolio, financing

target, or investment in financial instruments or projects in line
with the Sustainable Finance application.

c. Social performance in the past three (3) years:

1) FSI, Issuer or Publicly Listed Company commitment to providing

services for the equal product and/or services to customers;

2) employment that must include at least the following:

a) statement on the equality of employment or whether or not

forced and child labours are employed;

b) percentage of permanent employee remuneration at the

lowest level against regional minimum wage;

c) decent and safe work environment; and

d) training and capacity building for employees;

3) community, that must include at least the following:

a) information on operational activities or area producing

positive and negative impacts on local community including
financial literacy and inclusion;

b) community complain mechanism and number of community

complaints received and followed up; and

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 c) CSER relatable to supports to sustainable development
objectives including community empowerment programme
activity achievements.

d. FSI, Issuer and Publicly Listed Company Environmental Performance

that must include at least:

1) environmental costs that incur;

2) description on the use of environmentally friendly materials such

as materials of recyclable type; and

3) description on the use of energy that must at least include the

following:

a) amount and intensity of energy consumed; and

b) efforts and achievements made for energy efficiency

including use of renewable energy sources;

e. Environmental Performance of FSI, Issuer and Publicly Listed

Company whose business process directly relates to Environment, that
must include at least the following.

1) the performance under point d above;

2) information on operational activities or areas producing positive

and negative impacts on the surrounding Environment, especially
ecosystem carrying capacity improvement;

3) biodiversity that must include at least the following:

a) impacts from operational areas close to or situated in areas of

conservation or otherwise those that contain biodiversity; and

b) biodiversity conservation business carried run including flora

or fauna species protection;

4) emission that includes at least as follow:

a) amount and intensity of emission produced by type; and

b) efforts and achievements made in emission reduction;

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 5) waste and effluent that must include at least the following:

a) amount of waste and effluent produced by type;

b) waste and effluent management mechanism; and

c) spillover that occur (if any); and

6) number and content of Environmental complaint received and

resolved.

f. Sustainable Finance Product and/or Service development

responsibility that must include at least the following:

1) Sustainable Finance Product and/or Service innovation and

development

2) number and percentage of product and service having undergone

safety test for customers;

3) positive and negative impacts caused by Sustainable Finance

Product and/or Service and the process of distribution and
mitigation taken to address negative impacts;

4) number of product recalled and the reason; or

5) survey of customer satisfaction on Sustainable Finance Product

and/or Service

7. Written verification from independent party, if any.

Stipulated in Jakarta

on the date of July 18, 2017

CHAIRMAN OF THE BOARD OF

COMMISSIONER

OF FINANCIAL SERVICES AUTHORITY

MULIAMAN D. HADAD

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26
 ELUCIDATION

OF

REGULATION OF FINANCIAL SERVICES AUTHORITY

NO. 51/POJK.03/2017

ON

APPLICATION OF SUSTAINABLE FINANCE

TO FINANCIAL SERVICES INSTITUTION, ISSUER AND PUBLICLY LISTED

COMPANY

I. GENERAL

In order to realise steadily growing, inclusive and sustainable national economy,

with the ultimate goal to deliver economic and social prosperity to all the people,
as well as to wisely protect and manage Environment in Indonesia, the economic
development must prioritise the harmony between economic, social and
Environmental aspects. That is, because otherwise a development targeting sheer
economic growth will lead to social inequality and deteriorating Environmental
quality, along with all the implications.

To achieve such steadily growing, inclusive and sustainable national economy, it is

imperative that support be rallied to prevent against financing or investment
practices contributing to business activities that involve excessive use of natural
resources, increase social inequality and lead to the destruction of Environment.

The said financial system must apply sustainable principles capable of establishing
economic, social and ecologic values in models, processes and practices at the level
of business policy and decision making towards financial system stability and
business success in the long run by keeping contribution to the achievement of
sustainable development goals including guarantee of Environmental integrity, as
well as the current and future generations’ safety, capacity, prosperity and life
quality.

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As a developing country, Indonesia faces social inequality issues worth appropriate
concern. In addition, Indonesia is also a country geographically exposed to climate
change risks. Therefore, the better management of and prevention against social
and environmental risks is needed.

Application of Sustainable Finance to Indonesian financial institution system is the

implementation of Law 32 of 2009 on Environmental Protection and Management
to develop and apply environmentally aware economic instruments including
Environmentally friendly policies in the sectors of banking, capital market and non-
bank financial industry.

Application of Sustainable Finance principles also serves as a concrete realisation

of Indonesia’s commitment for the world to providing financial sources to allow
climate change mitigation and adaptation.

As per Law 21 of 2011 on Financial Services Authority, Financial Services

Authority functions to administer an integrated regulation and supervision system
over all activities in financial services sector. This way, Financial Services
Authority exercises full authority over the implementation of Sustainable Finance
in Indonesia. The commitment to implementing Sustainable Finance has been
established through the launching of Sustainable Finance Roadmap in December
2014.

Under the Sustainable Finance Roadmap, one of the elements to realise is the
availability of specific, binding regulations for all actors in financial services sector
in relation to the implementation of Sustainable Finance in Indonesia. Sustainable
Finance regulations are the answer to how all financial services or FSI stakeholders
will make commitment and implement concrete actions to endeavour the
implementation of sustainable development in Indonesia. The direction of the
arrangement of Sustainable Finance application is the established Sustainable
Finance in financial sector to promote economic, social and environmental
sustainability in the development process in Indonesia.

This arrangement of Sustainable Finance application aims to allow all FSIs, Issuers
and Public Companies to have consciousness or commitment to the implementation
of Sustainable Finance principles and contribute to the development of products

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 and services taking into account economic, social and Environmental aspects.
Furthermore, it is expected that such arrangement bring about conditions for fair
competition and avoid arbitrary activities harming parties thereto.

Sustainable Finance implementation objectives are as follow:

a. provide sources of financing necessary to achieve sustainable development

goals and financing pertaining to climate change in sufficient amount;
b. improve FSI, Issuer and Publicly Listed Company persistence and
competitiveness by means of the better social and Environmental risk
management by developing financial products and/or services applying
Sustainable Finance to allow positive contribution to financial system stability;
c. reduce social inequality, reduce and prevent against Environmental destruction,
maintain biodiversity and promote energy and natural resources use efficiency;
and
d. develop financial products and/or services that apply Sustainable Finance
principles.
II. ARTICLE BY ARTICLE

Article 1

Self-explanatory.

Article 2

Paragraph (1)

Self-explanatory.

Paragraph (2)

Point a

“Responsible investment principle” shall mean financial investment

approach in sustainable development projects and initiatives, natural
preservation products and policies promoting sustainable economic
development and believing that long term investment margin set up
depends on economic, social, Environmental and governance system.

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 Sustainable development shall be a fully conscious and planned effort
that integrates economic, social and Environmental aspects into
development strategy to guarantee the Environmental integrity as well
as the current and future generations’ safety, capacity, prosperity and
life quality.

Point b

“Sustainable business strategy and practice principle” shall mean

development of values to financial services sector to contribute to the
people through business policies and practices, as well as business
strategy application by FSI, Issuer and Publicly Listed Company by
minimising negative impacts and integrating social, economic,
Environmental and governance aspects in each sector and strategy of
respective business line.

Point c

“Social and environmental risk management principle” shall mean

integration of aspects of social responsibility and Environmental
protection and management in risk management to avoid, prevent
against, and minimise negative impacts coming out from social and
Environmental aspect-related risk exposure.

Point d

“Governance principle” shall mean application of governance to

aspects of social responsibility and Environmental protection and
management in a transparent, accountable, responsible, independent,
equal and reasonable manner.

Point e

“Informative communication principle” shall mean the use of

appropriate communication model concerning business organisational
strategy, governance, performance and prospect in all stakeholders.

Point f

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 “Inclusive principle” shall mean distribution of access to FSI, Issuer
and Publicly Listed Company products and/or services for the people
and to reach out the entire territory of the Unitary State of the Republic
of Indonesia to accelerate economic advance, social prosperity and
Environmental protection, especially for those who has been without
or otherwise lacked for access to such products and/or services.

Point g

“Priority sector development principle” shall mean provision of larger

portions to flagship sectors prioritised to achieve sustainable
development goals including climate change mitigation and
adaptation.

Point h

“Coordination and collaboration principle” shall mean improvement

of coordination and collaboration of all stakeholders in financial
services sector including ministries, agencies, sectors or business units
running work programmes closely relating to the implementation of
sustainable development in order to accelerate economic and social
welfare and Environmental quality for all the people of the Republic
of Indonesia and to boost public participation relating to economic,
social, Environmental and governance aspects.

Article 3

Paragraph (1)

Point a

“BUKU 3 and BUKU 4” shall mean Banks with business activities

provided under Financial Services Authority Regulation on business
activities and office network by Bank core capital.

“Foreign bank” shall mean:

1. branch office of the bank domiciled in foreign country;

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 2. Commercial Bank taking the form of Indonesian legal entity
whose more than fifty per cent (50%) of its shares are individually
or jointly held by foreign nationals and/or foreign legal entities;
and/or
3. Commercial Bank taking the form of Indonesian legal entity
whose maximum fifty per cent (50%) of its shares are individually
or jointly held by foreign nationals and/or foreign legal entities,
but involves control by Indonesian nationals and/or legal entities.

Point b

“BUKU 1” shall mean Banks with business activities as provided

under Financial Services Authority Regulation on business activity
and office network by Bank core capital.

“Issuer with small scale asset” shall mean Issuers with small scale
asset as provided under Financial Services Authority Regulation on
registration statement for public offering and capital increase by
provision of rights issue by issuer with small or medium scale asset.

“Issuer with medium scale asset” shall mean Issuer with medium scale
asset as provided under Financial Services Authority Regulation on
registration statement for public offering and capital increase by
provision of rights issue by issuer with small or medium scale asset.

Point c

“RCB BUKU 3” shall mean RCB with business activities as provided

under Financial Services Authority Regulation on RCB business
activity and office network by core capital.

Point d

“RCB BUKU 1 and RCB BUKU 2” shall mean RCB with business
activities as provided under Financial Services Authority Regulation
on RCB business activity and office network by core capital.

Point e

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 Self-explanatory.

Paragraph (2)

E.g.:

1. FSI taking form of BUKU 3 that is also Issuer, which is required to

apply Sustainable Finance as of the date of 1 January 2019;

2. FSI taking form of pawnshop company that is also an Issuer with

medium scale asset, which is required to apply Sustainable Finance as
of the date of 1 January 2022.

Article 4

Paragraph (1)

Self-explanatory.

Paragraph (2)

Sustainable Finance Action Plan in case of Islamic business unit may be

submitted separately from the Sustainable Finance Action Plan of the FSI
constituting parent company of the Islamic business unit.

Paragraph (3)

Self-explanatory.

Paragraph (4)

Self-explanatory.

Paragraph (5)

Self-explanatory.

Article 5

“Effectively implement Sustainable Finance Action Plan” shall mean the

involvement of the following between Sustainable Finance Action plan and its
realisation:

a. no deviation;

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 b. deviation is found but non-material;

c. material deviation is found but FSI has endeavoured to the best of its
capacity to comply, along with explanation appropriate and
acceptable/reasonable to the Financial Services Authority.

Article 6

Point a

Communication with shareholders may be carried out through, among

others, the general meeting of shareholders.

Point b

Sustainable Finance Action Plan shall be communicated to all

organisational levels of FSI to harmonise the action plan policies and
implementation by all stakeholders with FSI vision and mission.

Article 7

Paragraph (1)

Sustainable Finance Action Planning may be prioritised based on the

readiness of each FSI where at least one of the priorities under point a to c
is met. Other than the priorities under point a to c, FSI may plan for other
initiatives.

Point a

Sustainable Finance Products and/or Services shall be in line with the

needs of the communities that support the prioritised flagship sector
as provided under laws and regulations on national medium term
development plan.

Priority shall be set for flagship sectors based on the applicable laws
and regulations without prejudice to other sectors access to financial
services sector.

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 Examples for projects in line with the application of Sustainable
Finance shall include financing to renewable energy projects
(financing of electricity generation sourced from water, geothermal,
wind, solar, biogas, biomass, and other renewable energy sources set
by the Government), energy efficiency (financing of replacement of
air conditioning chiller, energy saving textile machinery, building
renovation to enhance energy efficiency by replacement with energy
saving lamps), sustainable agriculture (financing of organic farming
and compost entrepreneur), sustainable fishery (fishing activities
without trawl and explosive), green building project (financing of
green building construction); and green tourism (tourism to restore
biodiversity, as well as conservation of wildlife and other natural
resources).

Point b

Examples of FSI internal capacity building shall include trainings

aiming at enhancing FSI human resources’ capacity and capability in
implementing Sustainable Finance.

Point c

Examples of organisational adjustment shall include sustainable

function in place in the organisation.

Examples of risk management adjustment shall include FSI’s

consideration on and assessment of social and environmental risks in
all decision making activities.

Examples of FSI governance adjustment shall include insertion of

sustainable component to FSI structure and governance process.

Examples of FSI standard operating procedure shall include

consideration on and assessment of social and environmental aspects
in all of its standard operating procedures.

Paragraph (2)

Self-explanatory.

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Article 8

Paragraph (1)

Examples of CSER fund allocation that supports Sustainable Finance

application activities shall include:

1. financing to micro businesses that are feasible but yet to have access
to FSI financing for sustainable business development;
2. training on sustainable business for prospective customers;
3. campaign of sustainable production and consumption; and
4. insurance premium subsidy for farmer, fisherman, and poor and/or
low income communities vulnerable to disasters.

Paragraph (2)

Self-explanatory.

Paragraph (3)

Self-explanatory.

Paragraph (4)

Self-explanatory.

Article 9

Paragraph (1)

Granting of incentives shall be the implementation of environmental

economic instruments as provided under Law 32 of 2009 on Protection
and Management of Environment and shall be awarded to FSI, Issuer and
Publicly Listed Company for their active participation in Sustainable
Finance application.

Paragraph (2)

Self-explanatory.

Article 10

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 Paragraph (1)

Self-explanatory.

Paragraph (2)

Sustainability Report in case of Islamic FSI may be submitted separately

from the Sustainable Report of the FSI constituting parent company of the
Islamic business unit.

Paragraph (3)

Self-explanatory.

Paragraph (4)

Self-explanatory.

Paragraph (5)

Self-explanatory.

Paragraph (6)

Self-explanatory.

Paragraph (7)

E.g.:

1. in case of FSI taking form of BUKU 3 that is also Issuer, initial

submission of Sustainability Report shall be made for the period
of 1 January-31 December 2019;
2. in case of FSI taking form of pawnshop company that is also
Issuer with medium scale asset, initial submission of
Sustainability Report shall be made for the period of 1 January-
31 December 2022.

Paragraph (8)

Self-explanatory.

Article 11

Self-explanatory.

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 Article 12

Self-explanatory.

Article 13

Self-explanatory.

Article 14

Self-explanatory.

SUPPLEMENT TO STATE GAZETTE OF THE REPUBLIC OF INDONESIA

YEAR 2017 NO.169

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