Search for:

In brief

In 2017, the Financial Services Authority (Otoritas Jasa Keuangan – “OJK“) introduced a requirement for certain entities to implement sustainable finance, by issuing Rule No. 51/POJK.03/2017 on Implementation of Financial Sustainability for Financial Services Providers, Issuers and Public Companies (“OJK Rule 51“).

Under OJK Rule 51, in addition to the requirement to implement sustainable finance, Financial Services Providers (Lembaga Jasa Keuangan),  Issuers1  and Public Companies2 are also required to submit a Sustainable Finance Action Plan (Rencana Aksi Keuangan Berkelanjutan – RAKB) and/or a Sustainability Report (Laporan Keberlanjutan) to OJK.

OJK Rule 51 distinguishes between the terms Issuers and Public Companies as it tries to capture companies that may not necessarily conduct a public offering, but whose shares and paid-up capital meet the threshold of a Public Company. For the purpose of this document, however, we will use the term Issuers (to also capture the definition of Public Companies).

Key takeaways

We look at some of the most commonly asked questions below:

  1. Who does the rule apply to?

This rule applies to Financial Services Providers or Issuers.
Financial Services Providers include entities engaged in sectors such as banking, capital market, insurance, pension funds and financing. They also include guarantee agencies and the Indonesian Export Financing Institution (Lembaga Pembiayaan Ekspor Indonesia – LPEI) (“Financial Services Providers”).

  1. What is sustainable finance?

OJK Rule 51 defines sustainable finance as a form of support from the financial services sector to create sustainable economic growth by aligning economic and social interests with the environment.

Sustainable finance is based upon the principles of responsible investment; sustainable business strategy and practices; social and environmental risk management; good governance; informative communication; inclusiveness; development of leading priority sectors; coordination and collaboration.

  1. What is a Sustainable Finance Action Plan? Who does it apply to?

A Sustainable Finance Action Plan (commonly known as RAKB) is a document that describes a Financial Services Provider’s short-term (i.e., one year) and long-term (i.e., five years) plans for implementing sustainable finance based on the principles mentioned above. This document must be submitted to OJK.

In 2018, OJK issued a technical guideline for banks to assist them in preparing their Sustainable Finance Action Plans. However, OJK has yet to issue a technical guideline for other Financial Services Providers (i.e., for non-banks).
Issuers that are not Financial Services Providers are not required to submit Sustainable Finance Action Plans. Sustainable Finance Action Plans only apply to Financial Services Providers (including Issuers that are Financial Services Providers).

  1. What is a Sustainability Report? Who does it apply to? 

As the name suggests, a Sustainability Report is a report on sustainable business practices that must be prepared by Financial Services Providers and Issuers. The Sustainability Report must be prepared substantially in the form that is stipulated under OJK Rule 51.

OJK has not yet given specific examples and parameters for how much effort a company needs to make in order for that effort to be deemed as sustainable. For example, efforts such as reducing one’s water consumption may indeed be an example of a sustainable effort, but would reducing one’s consumption by only 1 litre per day be deemed as sustainable? Or would it be seen as a mere formality to tick the requirements under OJK Rule 51?

The requirement to prepare and submit a Sustainability Report applies to Financial Services Providers and Issuers.

  1. Who needs to prepare a Sustainability Report and implement sustainable finance?

OJK Rule 51 requires all Financial Services Providers and Issuers to prepare a Sustainability Report and to also implement sustainable finance. As such, even though certain Issuers (that are not Financial Services Providers) are not required to prepare and submit a Sustainable Finance Action Plan, they are still required to implement sustainable finance in their business operations, and that implementation must be reflected in their Sustainability Reports.

  1. Can CSR activities be included in the Sustainable Finance Action Plan and/or Sustainability Report?

OJK Rule 51 acknowledges the existence of CSR activities and seems to distinguish the concept of CSR from the concept of sustainability. For example, OJK Rule 51 clearly stipulates that Issuers that are not Financial Services Providers that are required to conduct CSR may allocate a certain amount of funds from their CSR to support the implementation of sustainable finance. If CSR funds are allocated, they should be reflected in the Issuer’s Sustainability Report.

Considering the above provision, OJK Rule 51 seems to imply that CSR does not necessarily translate to sustainable finance, and therefore not all CSR can be included in a company’s Sustainable Finance Action Plan and/or a Sustainability Report.

Our understanding from OJK is that certain CSR activities can be included in a company’s Sustainable Finance Action Plan and/or Sustainability Report to the extent that those activities support the implementation of sustainable finance. Although OJK does not mention what those activities are specifically, OJK Rule 51 stipulates the following examples of what the allocated CSR funds should be utilized for in order to support the implementation of sustainable finance:

  1. providing financing to micro businesses that don’t have access to funding from Financial Services Providers to be used for sustainable business development
  2. providing training for prospective customers on sustainable business
  3. making a campaign on sustainable production and consumption
  4. subsidizing insurance premiums for farmers, fishermen and low and/or middle-income people that are vulnerable to disasters

As such, if a company is already conducting the above CSR activities, it could be argued that those CSR activities support the implementation of sustainable finance, and therefore can be presented in the company’s Sustainable Finance Action Plan and/or Sustainability Report.

  1. Does an independent party have to be appointed to verify the activities set out in the Sustainability Report?

No. OJK Rule 51 does not require Sustainability Reports to be verified. But if they are verified, OJK Rule 51 requires an independent party to verify them.

  1. When do Issuers need to submit their Sustainability Reports to OJK?

Issuers with large-scale assets must submit their first Sustainability Report by 30 April 2021 for the reporting period of 1 January until 31 December 20203. The deadlines for the first submission for Issuers with medium-scale assets and Issuers with small-scale assets are 30 April 2023 and 30 April 2025 respectively.

Financial Services Providers on the other hand, depending on the sector, may be subject to a different timeline. For example, financing companies and insurance companies must submit a report at the latest on 30 April 2021 while securities companies that administer their clients’ accounts must submit a report at the latest on 30 April 2023.

What if the company is an Issuer and a Financial Services Provider?

If the company is an Issuer and a Financial Services Provider at the same time, it would be subject to the earlier submission deadline.

Can the Sustainability Report be combined with the annual report?

OJK Rule 51 allows for Sustainability Reports to be prepared as a separate report or as part of an annual report. If the Sustainability Report is part of the annual report, then the deadline for its submission follows the deadline for the submission of the annual report of that company. The Sustainability Report must also be published on the company’s website.

  1. Can the Sustainability Report just report activities that are done by the subsidiaries of the Financial Services Provider or the Issuers? 

The Sustainability Report should reflect the Financial Services Provider’s or the Issuer’s activities and should not include the activities of its subsidiaries’. The Financial Services Provider or Issuer may include its subsidiaries’ activities to the extent that the Financial Services Provider or Issuer itself is also directly involved in the activities done by its subsidiaries.

  1. What are the sanctions under OJK Rule 51?

Failure to comply with certain requirements under OJK Rule 51 will expose entities to administrative sanctions (verbal or written warnings). However, it is unclear at this stage whether OJK will impose any sanction if, for example, companies do not (entirely or partially) meet their sustainable targets. As more companies will be subject to their first reporting next year, we will see then how strictly OJK enforces this rule.

1 OJK Rule 51 defines Issuers as parties that conduct public offerings.

2 OJK Rule 51 defines Public Companies as companies whose shares are owned by at least 300 shareholders and have paid-up capital of at least IDR 3 billion.

3 Note that if Issuers (with large-scale assets) are also a certain type of Financial Services Providers (e.g., BUKU 3, BUKU 4, and foreign banks), they would already be subject to an earlier deadline submission.


Iqbal is the Head of the Capital Markets Practice Group. Iqbal has been involved in various capital market transactions, representing both issuers and banks/underwriters, in both equity and debt capital market. His work encompasses various sectors, including IT, plantations, healthcare, mining and transportation sectors. When representing issuers, Iqbal's work often also involves pre-IPO work. This includes assisting the issuer in putting in place the appropriate corporate and shareholding structures (which may include selling out or injecting new assets). Other than capital raising, over the years Iqbal has also been involved and led teams in doing most of the delisting and going private transactions in Indonesia. Iqbal has also been involved in debt issuance transactions, both USD and IDR denominations. Iqbal also regularly advises clients on various capital market issues such as disclosures, good corporate governance, related party and material transactions, and takeover issues.


Jessie Setiono is an Associate in Baker McKenzie's Jakarta office.