BRI stopped funding oil and gas -- what does this mean for other banks?
“We are not participating [lending to the coal and oil sector]; our credit portfolio is [currently] below three percent in coal and oil. Let those sectors be taken care of by the experts,” said Mr Sunarso, the President Director of Bank Rakyat Indonesia (BRI) at the World Economic Forum in Davos, Switzerland.
On the 3rd of June 2022, BRI made the landmark decision to stop providing financial support (divest) to the fossil fuels sector, which includes gas and oil. An excellent and impressive achievement to make, BRI’s decision is an important turning point within the climate movement. Especially, when you take into account the fact that 60 of the largest commercial banks in the world have financed $3.8 trillion to fossil fuel companies between the years 2016 to 2020. So, the big question that comes out of this development is: What does this mean for other banks?
It’s simple. BRI is the second largest, and also the oldest, financial institution established in Indonesia. If one of the largest and oldest banks in the nation has made moves to reduce their climate impact, then other banks will have to ramp up their efforts if they would like to remain a bank of choice for their current customers. Research from Tink shows that more than half (53%) of young adults in the UK aged between 18 to 34 want banks to help them reduce their environmental footprint a lot more. Although financial and climate literacy is not as developed in Indonesia - climate-conscious consumers are still growing, so if other Indonesian banks want to keep and attract more climate-conscious clients, then they will absolutely have to follow BRI’s footsteps.
BRI has also implemented other environmentally friendly programs, policies, and initiatives. This gives them an edge and makes them stand out from other banks. One example of this includes adopting electric cars, which are used in the Gianyar and Renon offices in Bali. In addition to this, BRI has contributed to developing renewable energy (EBT) by financing PLT Poso Energy and Kerinci Merangin, which are hydroelectric power plants (67 - 69 sustainability report). It should be considered that other banks, such as Bank Mandiri, have also implemented similar programs, but nothing has measured up to BRI’s decision to stop financing oil and gas.
To quote the Rainforest Action Network, “fossil finance is climate damage”. The societal impacts of BRI’s decision to stop financing oil and gas will be huge.
More consumers can have a clearer understanding of what their money is being used for, and specifically they may feel better knowing that their money is not going to fund dirty investments.
Money can be divested from the fossil fuels industry, and reallocated to fund clean, climate-friendly programs that may provide better returns and potentials. For example, it could be used to support renewable energy projects, eco-friendly startups, and NGOs.
Other competing banks may follow BRI’s footsteps and also divest from oil and gas.
One factor to keep into account is that BRI’s largest shareholder is the government - in other words, BRI is essentially a government-owned entity. As such, while BRI’s environmental initiatives are significant to the climate movement, the bank’s ownership status raises the following question: why hasn’t the government made efforts to mitigate climate change through other means as well, such as giving Indigenous communities more land rights, halting palm oil operations, or banning deforestation?
Ultimately, BRI’s divestment from fossil fuels is an important, but still small part in our fight against climate change. We can only hope that other banks in Indonesia will follow BRI’s footsteps and use their power to help tackle the climate crisis collectively.
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