There is a growing momentum on the critical role that corporate transition plans can play in supporting a credible, orderly transition to a low-emissions and climate-resilient future. Indonesia is among the countries actively setting standards and requirements for transition plans, which are vital to align the business models and activities of companies in both the financial sector and the real economy with environmental objectives.
Policies issued by Indonesia’s regulatory bodies have promoted development of a sustainable finance market, yet our research has shown that financial institutions are still in the early days of developing their transition plans.
Indonesia’s path towards transition plans
When high-level net-zero pledges are backed by clear, actionable and verifiable measures, they do more than build trust. They also help avoid the risks of greenwashing, delayed action, or locking in reliance on high-carbon activities and energy sources – all of which can slow down progress toward net zero.
Yet the development of transition plans by financial and non-financial corporates remains slow and uneven across regions and sectors. While many public and private actors have set net-zero targets, evidence shows a persistent gap between these high-level targets and actionable transition plans. The credibility and quality of existing transition plans also seem to be varied. Some of the key issues with integrity of transition plans relate to corporates’ limited alignment of their capital and operational expenditures with their net-zero targets as well as their use of and reliance on carbon credits and offsets. Disclosure of transition plans also remains scarce.
To address these gaps, policy makers, regulators, supervisors and standard-setters around the world are increasingly requiring or encouraging financial and non-financial corporates to develop and disclose transition plans. Some jurisdictions are even codifying standards into law or issuing guidance to help market actors craft credible plans. In 2022, the Organisation for Economic Co-operation and Development (OECD) published the Guidance on Transition Finance. It outlines elements of credible corporate transition plans, recognising that they are essential for robust transition finance approaches and related financial instruments.
Indonesia’s move towards transition plans follows a wide range of other sustainable finance policies and regulations that the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, OJK) has put in place over the years, such as its taxonomy, guidelines for climate risk management and scenario analysis, among others.
In August 2025, the Indonesian Institute of Accountants launched the Sustainability Disclosure Standards, consisting of two sets of standards: PSPK 1 focused on general requirements for disclosing sustainability-related financial information, and PSPK 2 which addresses climate-related disclosures. Reporting based on such standards is expected to start on 1 January 2027 with gradual implementation starting with larger entities.
The draft climate-related disclosure standards require reporting of transition plans, including information on assumptions, dependencies and uncertainties. OJK is currently drafting an amendment to its sustainable finance regulation which will integrate several different provisions, such as implementation of PSPK 1 and 2 in the financial sector, issuers and public companies, the sustainable finance taxonomy, and adoption of requirements on transition plans.
Are Indonesian financial institutions ready to plan the transition?
A joint OJK/OECD survey among Indonesian financial institutions conducted in 2024 reveals that net-zero target setting and transition planning is at the early stages when compared to OECD countries. Only 30% of respondents had public commitments on climate change, and only 20% had set net-zero targets. More than a quarter of respondents had developed a transition plan, but only 11% made it publicly available.
When asked about the reasons why they have not yet developed a transition plan, most cited lack of preparedness (41%), followed by (real or perceived) lack of relevance (27%), lack of regulatory requirements (18%), and a lack of urgency (12%). Other challenges for financial institutions include obtaining emissions data from companies, as well as conducting climate scenario analysis which is still new for financial analysts.
Amongst key constraints in their transition planning ability, respondents indicated four main challenges (with equal importance): limited human resources; competing priorities; limited IT infrastructure to obtain climate-related data of investment and lending activities; and limited resources to monitor transition progress. When asked about institutional capacity to develop and implement transition plans, over half of the respondents indicated that they have high (13%) to medium (38%) capacity, while the remainder reported zero to low capacity.
Recommendations for policy makers and regulators
To address the barriers preventing more companies adopting transition plans, we have a number of key recommendations for policy makers and regulators to build a credible transition planning ecosystem in Indonesia.
- Developing robust standards on credible transition plans based on international guidance. Credible transition plans should (inter alia):
- articulate detailed implementation strategies as well as foreseen limitations and key uncertainties and external dependencies;
- disclose data on a core set of metrics (eg share of assets aligned or not with transition criteria, emission reductions), underlying methodologies and assumptions;
- identify existing assets exposed to physical and transition risk (including those that may lead to emissions lock-in) and clearly set out the steps for prevention (eg an early retirement or engagement plan).
- Ensuring policy coherence and streamlining reporting obligations under a unified reporting framework, as being developed in amendments to OJK’s sustainable finance regulations.
- Developing science-based sector-specific transition pathways and align taxonomy eligibility criteria accordingly.
- Enhancing climate data and underlying methodologies and providing capacity building support to financial institutions, their clients and suppliers.
- Supporting small enterprises with public financial incentives, as well as technical assistance to increase their capacity to collect climate data and start planning their transition.
- Developing assurance and verification standards and skills to strengthen credibility and trust.
- Developing a centralised climate database to support companies developing robust and data-driven transition plans.
With additional regulation and guidance forthcoming from OJK, the development and disclosure of transition plans in Indonesia is expected to accelerate. Capacity building will be critical to make sure transition plan developers – as well as investors, lenders and other companies – have the right tools to start planning their transition to low-emission and resilient pathways, as well as to implement those plans successfully.
As more jurisdictions follow this path, the momentum around transition planning could help ensure that net-zero pledges come with clear, transparent, and accountable plans, turning climate promises into real-world progress.
The views and opinions expressed in this article are the author’s own and do not represent the official position, policies or views of their organisation or employer.
This page was last updated January 6, 2026
Written by
Valentina Bellesi is a policy analyst in the clean energy finance and investment mobilisation programme at the Organisation for Economic Cooperation and Development, including co-ordination of capacity-building activities in Indonesia. Previously, she worked at the Council of Europe Development Bank and at the Institute of Latin American Studies.
Yuki Yasarani works at Indonesia Financial Services Authority (OJK), where they contribute to efforts that support sustainable finance and climate-related financial initiatives. Yuki is passionate about exploring how policy, climate and financial systems can shape a more resilient future.
