Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 51 /POJK.03/2017
CONCERNING
THE IMPLEMENTATION OF SUSTAINABLE FINANCE
FOR FINANCIAL SERVICES INSTITUTIONS, ISSUERS, AND PUBLIC COMPANIES BY THE GRACE OF THE ALMIGHTY GOD THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that to realize sustainable development capable of maintaining economic stability and being inclusive, a national economic system is needed that emphasizes harmony between economic, social, and environmental aspects; b. that to drive the national economy emphasizing harmony between economic, social, and environmental aspects, capable of maintaining economic stability and being inclusive, adequate funding sources are required;
c. that the development of environmentally friendly financial institution systems has been mandated in Law Number 32 of 2009 concerning Environmental Protection and Management;
d. that the Sustainable Finance Roadmap in Indonesia, which has been issued by the Financial Services Authority, needs to be followed up with specific and binding regulations for all financial services institutions, issuers, and public companies; e. that based on the considerations referred to in letters a through d, it is necessary to establish a Financial Services Authority Regulation concerning the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies; Recalling:

1. Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
2. Law Number 11 of 1992 concerning Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 37, Supplement to the State Gazette of the Republic of Indonesia Number 3477);
3. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
4. Law Number 21 of 2008 concerning Islamic Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
5. Law Number 2 of 2009 concerning the Indonesian Export Financing Institution (State Gazette of the Republic of Indonesia Year 2016 Number 116, Supplement to the State Gazette of the Republic of Indonesia Number 5256);
6. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
7. Law Number 24 of 2011 concerning Social Security Administration Agencies (State Gazette of the Republic of Indonesia Year 2016 Number 116, Supplement to the State Gazette of the Republic of Indonesia Number 5256);
8. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia Year 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);
9. Law Number 1 of 2016 concerning Guarantees (State Gazette of the Republic of Indonesia Year 2016 Number 9, Supplement to the State Gazette of the Republic of Indonesia Number 5835);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE IMPLEMENTATION OF SUSTAINABLE FINANCE FOR FINANCIAL SERVICES INSTITUTIONS, ISSUERS, AND PUBLIC COMPANIES.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are meant:

1. Financial Services Institution, hereinafter abbreviated as FSI, is an institution that conducts activities in the banking, capital market, insurance, pension fund, financing institution, and other financial services sectors.
2. Other Financial Services Institution refers to pawnshops, guarantee institutions, the Indonesian Export Financing Institution, secondary housing financing companies, and Social Security Administration Agencies as referred to in regulations concerning pawnshops, guarantees, the Indonesian Export Financing Institution, secondary housing financing companies, and social security administration agencies.
3. Commercial Bank is:
   a. Commercial Bank as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking; b. Sharia Commercial Bank as referred to in Law Number 21 of 2008 concerning Islamic Banking.
4. Rural Bank, hereinafter abbreviated as BPR, is a Rural Bank as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking.
5. Sharia Rural Financing Bank, hereinafter abbreviated as BPRS, is a Sharia Rural Financing Bank as referred to in Law Number 21 of 2008 concerning Islamic Banking.
6. Issuer is a party that conducts a public offering.
7. Public Company is a corporation whose shares are owned by at least 300 (three hundred) shareholders and have paid-in capital of at least Rp3,000,000,000.00 (three billion rupiah) or a number of shareholders and paid-in capital established by government regulation.
8. Sustainable Finance is the overall support of the financial services sector to create sustainable economic growth by aligning economic, social, and environmental interests.
9. Environment is a unit of space with all objects, energy, conditions, and living creatures, including humans and their behavior, which influence nature itself, the continuity of life, and the welfare of humans and other living creatures.
10. Sustainable Financial Products and/or Services are financial products and/or services that integrate economic, social, and environmental aspects, as well as governance, into their features.
11. Sustainable Finance Action Plan is a written document describing the business activity plans and work programs of FSIs for the short term (one year) and long term (five years) that are consistent with the principles used to implement Sustainable Finance, including strategies to realize the plans and work programs according to the targets and times set, while still paying attention to the fulfillment of prudential regulations and risk management implementation.
12. Social and Environmental Responsibility, hereinafter abbreviated as SER, is a commitment to participate in sustainable economic development to improve the quality of life and the environment, beneficial to the Corporation itself, local communities, and society in general.
13. Sustainability Report is a report announced to the public containing the economic, financial, social, and environmental performance of an FSI, Issuer, and Public Company in conducting sustainable business.

Article 2
(1) FSIs, Issuers, and Public Companies are required to implement Sustainable Finance in the business activities of FSIs, Issuers, and Public Companies.
(2) The implementation of Sustainable Finance as referred to in paragraph (1) is carried out using:
a. responsible investment principles; b. sustainable business strategy and practice principles;
c. social and environmental risk management principles;
d. governance principles; e. informative communication principles; f. inclusive principles; g. priority priority sector development principles; and h. coordination and collaboration principles.

Article 3
(1) The implementation of Sustainable Finance for FSIs, Issuers, and Public Companies as referred to in Article 2 must be carried out with the following provisions:
a. for FSIs that are Commercial Banks included in the Commercial Bank Group based on Business Activities (BUKU) 3, BUKU 4, and foreign banks, effective as of January 1, 2019; b. for FSIs that are BUKU 1 and BUKU 2, financing companies, sharia financing companies, venture capital companies, sharia venture capital companies, infrastructure financing companies, insurance companies, sharia insurance companies, reinsurance companies, sharia reinsurance companies, the Indonesian Export Financing Institution, secondary housing financing companies, Social Security Administration Agencies, Issuers other than Issuers with small-scale assets and Issuers with medium-scale assets, and Public Companies, effective as of January 1, 2020;
c. for FSIs that are Rural Banks based on Business Activities (BPRKU) 3 including BPRSs that have core capital equivalent to BPRKU 3, securities companies that administer customer securities accounts, and Issuers with medium-scale assets, effective as of January 1, 2022;
d. for FSIs that are BPRKU 1 and BPRKU 2 and BPRSs that have core capital equivalent to BPRKU 1 or BPRKU 2, Issuers with small-scale assets, securities companies that do not administer customer securities accounts, pawn companies, guarantee companies, and sharia guarantee companies, effective as of January 1, 2024; and e. for FSIs that are pension funds with total assets of at least Rp1,000,000,000,000.00 (one trillion rupiah), effective as of January 1, 2025. (2) In the event that FSIs as referred to in paragraph (1) are also Issuers or Public Companies, the obligation to implement Sustainable Finance by FSIs takes effect on the earlier implementation date of Sustainable Finance.

CHAPTER II
IMPLEMENTATION OF SUSTAINABLE FINANCE
Article 4
(1) To implement Sustainable Finance as referred to in Article 2 paragraph (1), FSIs are required to prepare a Sustainable Finance Action Plan as contained in Appendix I, which is an integral part of this Financial Services Authority Regulation. (2) The Sustainable Finance Action Plan as referred to in paragraph (1) must be submitted annually to the Financial Services Authority:
a. at the same time as the submission of the business plan for FSIs required to submit a business plan as part of the business plan or in a separate document; and b. no later than January 31 for FSIs not required to submit a business plan. (3) If the submission deadline for the Sustainable Finance Action Plan as referred to in paragraph (2) letter b falls on a Saturday, Sunday, or holiday, the Sustainable Finance Action Plan must be submitted on the next working day. (4) The Sustainable Finance Action Plan must be prepared by the Board of Directors and approved by the Board of Commissioners. (5) FSIs that are also Issuers or Public Companies must implement the provisions as referred to in paragraph (1) through paragraph (4).

Article 5
FSIs are required to implement the Sustainable Finance Action Plan effectively.

Article 6
FSIs are required to communicate the Sustainable Finance Action Plan to:
a. shareholders; and b. all levels of the organization within the FSI.

Article 7
(1) The Sustainable Finance Action Plan as referred to in Article 4 paragraph (1) must be prepared based on the priorities of each FSI at least:
a. the development of Sustainable Financial Products and/or Services, including increasing financing, investment, or placement portfolios in financial instruments or projects consistent with the implementation of Sustainable Finance; b. the development of internal FSI capacity; or
c. the adjustment of organization, risk management, governance, and/or standard operating procedures (SOP) of the FSI consistent with the principles of implementing Sustainable Finance.
(2) The Sustainable Finance Action Plan as referred to in paragraph (1) must be accompanied by implementation time targets.

Article 8
(1) FSIs required to implement SER must allocate a portion of SER funds to support the implementation of Sustainable Finance activities.
(2) Issuers that are not FSIs and Public Companies that are not FSIs but are required to implement SER may allocate a portion of SER funds to support the implementation of Sustainable Finance activities. (3) The allocation of SER funds as referred to in paragraph (1) must be stated in the Sustainable Finance Action Plan. (4) The report on the use of SER funds as referred to in paragraph (1) and paragraph (2) must be stated in the Sustainability Report.

CHAPTER III
PROVISION OF INCENTIVES
Article 9
(1) FSIs, Issuers, and Public Companies that effectively implement Sustainable Finance may be given incentives by the Financial Services Authority.
(2) Incentives as referred to in paragraph (1) may include:
a. including FSIs, Issuers, and Public Companies in human resource competency development programs; b. the awarding of the Sustainable Finance Award; and/or
c. other incentives.

CHAPTER IV
SUBMISSION OF SUSTAINABLE FINANCE ACTION PLANS, REPORTING, AND PUBLICATION
Article 10
(1) FSIs, Issuers, and Public Companies are required to prepare a Sustainability Report.
(2) The Sustainability Report as referred to in paragraph (1) is prepared separately from the annual report or as an integral part of the annual report.
(3) The Sustainability Report as referred to in paragraph (1) must be submitted to the Financial Services Authority annually no later than the submission deadline for the annual report applicable to each FSI, Issuer, and Public Company. (4) In the event that FSIs, Issuers, and Public Companies submit the Sustainability Report separately from the annual report, the Sustainability Report must be submitted to the Financial Services Authority annually no later than April 30 of the following year. (5) If the submission deadline for the Sustainability Report as referred to in paragraph (4) falls on a Saturday, Sunday, or holiday, the Sustainability Report must be submitted on the next working day. (6) The first Sustainability Report must be submitted for the reporting period:
a. January 1 to December 31, 2019, for FSIs that are BUKU 3, BUKU 4, and foreign banks; b. January 1 to December 31, 2020, for FSIs that are BUKU 1 and BUKU 2, financing companies, sharia financing companies, venture capital companies, sharia venture capital companies, infrastructure financing companies, insurance companies, sharia insurance companies, reinsurance companies, sharia reinsurance companies, the Indonesian Export Financing Institution, secondary housing financing companies, Social Security Administration Agencies, Issuers other than Issuers with small-scale assets and Issuers with medium-scale assets, and Public Companies;
c. January 1 to December 31, 2022, for FSIs that are BPRKU 3 including BPRSs that have core capital equivalent to BPRKU 3, securities companies that administer customer securities accounts, and Issuers with medium-scale assets;
d. January 1 to December 31, 2024, for FSIs that are BPRKU 1 and BPRKU 2 and BPRSs that have core capital equivalent to BPRKU 1 or BPRKU 2, Issuers with small-scale assets, securities companies that do not administer customer securities accounts, pawn companies, guarantee companies, and sharia guarantee companies; and e. January 1 to December 31, 2025, for FSIs that are pension funds with total assets of at least Rp1,000,000,000,000.00 (one trillion rupiah). (7) In the event that FSIs as referred to in paragraph (1) are also Issuers or Public Companies, the obligation to submit the first Sustainability Report is submitted by the FSI for the earlier Sustainability Report period. (8) The Sustainability Report as referred to in paragraph (1) must be prepared in the format as referred to in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Article 11
The Sustainable Finance Action Plan as referred to in Article 4 paragraph (1) and the Sustainability Report as referred to in Article 10 paragraph (1) must be submitted offline (offline) to the Financial Services Authority:
a. for FSIs that are banks, addressed to:

1. the relevant Bank Supervision Department or the Sharia Banking Department for banks headquartered or having branch offices of banks located outside the country located in the Special Capital Region of Jakarta; or
2. the Regional Office of the Financial Services Authority or the Financial Services Authority Office that oversees the area of the bank's headquarters;
   b. for FSIs that are Securities Companies, Issuers that are not FSIs, and Public Companies that are not FSIs, addressed to the relevant Capital Market Supervision Department;
   c. for FSIs that are financing companies, sharia financing companies, venture capital companies, sharia venture capital companies, infrastructure financing companies, insurance companies, sharia insurance companies, reinsurance companies, sharia reinsurance companies, and pension funds, addressed to the relevant Non-Bank Financial Industry Supervision Department; and
   d. for Other Financial Services Institutions, addressed to the Department that supervises each Other Financial Services Institution.

Article 12
(1) FSIs, Issuers, and Public Companies are required to publish the Sustainability Report as referred to in Article 10 paragraph (1).
(2) The publication of the Sustainability Report as referred to in paragraph (1) must be conducted through the websites of FSIs, Issuers, and Public Companies no later than April 30 of the following year. (3) For FSIs that do not yet have a website, the Sustainability Report must be published through printed media or other announcement media that is easily readable by the public no later than April 30 of the following year.

CHAPTER V
SANCTIONS
Article 13
(1) FSIs that violate the provisions as referred to in Article 2 paragraph (1), Articles 3 through 7, Article 8 paragraph (1), Article 10, and/or Article 12 are subject to administrative sanctions in the form of warnings or written notices. (2) Issuers that are not FSIs and Public Companies that are not FSIs that violate the provisions as referred to in Article 2 paragraph (1), Article 10, and/or Article 12 are subject to administrative sanctions in the form of warnings or written notices.

CHAPTER VI
CLOSING PROVISIONS
Article 14
This Financial Services Authority Regulation takes effect as of the date of enactment.

This copy is consistent with the original.
Legal Director 1
Legal Department signed
Yuliana

For the knowledge of everyone, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on July 18, 2017
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Enacted in Jakarta on July 27, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 169