OJK Introduces Sustainable Finance Requirements for Major Pension Funds

New Regulatory Mandate for Large Pension Funds

The Financial Services Authority (OJK) has mandated that pension funds managing assets of Rp1 trillion or more must now develop and submit comprehensive sustainable finance action plans. This regulatory requirement, emphasized by Ogi Prastomiyono, Head of OJK's Insurance, Guarantee, and Pension Fund Supervision Executive, aligns with the implementation of POJK 51/2015 in 2024. The regulation is designed to foster the growth of sustainable finance practices within Indonesia's pension fund industry.

Current Investment Landscape and Future Directions

Currently, pension fund investments remain heavily concentrated in fixed-income instruments such as State Securities (SBN) and bank deposits. The Ministry of Finance has suggested that pension funds should consider expanding their investment portfolios to include assets backed by renewable energy projects. Ihda Muktiyanto, Director of Pension Fund Development at the Ministry of Finance, highlighted the need for a more balanced investment strategy that includes green instruments and sustainable investments while maintaining prudent risk management practices.

Balancing Risk and Return in Pension Fund Investments

While the current investment approach has kept risk well-managed, there's concern that it might limit long-term returns for pension fund participants. The Ministry of Finance advocates for a broader investment scope that includes new and renewable energy (EBT) sectors, which could potentially enhance investment yields while supporting national sustainability goals. This strategic shift aims to create a more diversified and resilient investment portfolio for pension funds.