ADB’s Yoi: Development bank backing away from new coal investments in Indonesia.

The Asian Development Bank (ADB) has said it is staying away from coal-related projects in Indonesia and continues to open itself to gas and renewable energy investments, joining the wave of diversion by hundreds of financial institutions around the globe.

Yuichiro Yoi, unit head for Indonesia at ADB’s private sector operations department, told The Jakarta Post that economic factors and public sentiment were the two reasons to avoid coal investment. “The world’s moving away from coal, that’s the sentiment I can’t change or deny, that is the sentiment in the majority of the world. I just have to play along,” he said on the sidelines of a gas exhibition in Jakarta on Thursday.

“If it [coal power plants] becomes a stranded asset, it is a credit risk. Going forward it’ll be more difficult to do a project with coal. Now you not only worry about reputation but also have to worry about the risk of losing money.”

Reports from global energy think tank Institute for Energy Economics and Financial Analysis (IEEFA) in February showed that over 100 globally significant financial institutions have divested from thermal coal, including 40 percent of the top 40 global banks and 20 globally significant insurers. They are increasingly reluctant to invest in companies related to fossil fuels as the commodities are deemed unsustainable amid rising pressure to limit environmental damage.

Yuichiro further said that to date the ADB had yet to issue a written policy against coal, like many other global financiers, but experience has shown him that coal-related projects are hard to be approved by the bank’s system. “If there’s any chance to do a coal-fired power plant, there’s a need to be an extremely good story in terms of impact, that outweighs the negative connotations of doing a project with coal,” he said, adding that the ADB only has gas and renewable energy projects in Indonesia, particularly geothermal power plants.

Cumulative investment from the ADB in Indonesia’s energy sector has reached $7.3 billion and disbursed across 102 projects, the bank’s data shows.

8 August 2019

IEEFA