What Is The Greenwash Index?
The Greenwash Index website is our effort to create an exclusion list, which in a general context is defined as a list of entities that are intentionally excluded from standard procedures due to not fulfilling the general criteria of a specific category.
In the context of sustainable finance, an exclusion list will not absolve companies from their responsibility in adhering to the current regulations. However, the existence of an exclusion list may greatly help identify companies that are actively involved in operations that go against the principles of ecological responsibility, social responsibility, and ESG.
These companies are thus categorized as unfit to receive financial leverages from financial service institutions.
Background of the exclusion list
- The Paris Agreement had set carbon emission reduction targets for all countries to prevent global temperature rise of more than 2°C, striving to limit it to as low as 1.5°C. Indonesia has in turn reinforced its climate targets in its Enhanced NDC policy, focusing on emission reductions to achieve a net-zero sink by 2060.
- According to data from Global Forest Watch, Indonesia’s primary forest area loss showed significant decline, from 929 thousand hectares (kha) in 2016 to 203 kha in 2021. However, deforestation rate has seen a worrying resurgence in the last two years, reaching 230 kha in 2022 and 292 kha in 2023.
- Analysis by Forests & Finance reveals that an average of $9 billion (approximately Rp148 trillion) worth of financial loans and guarantees between 2016 and September 2023 posed significant risks to forests in Indonesia . Bank Mandiri, Bank Rakyat Indonesia, Bank Central Asia, and Bank Negara Indonesia rank as the largest creditors.
- The 2022 Bank Ranking Report by the ResponsiBank Indonesia Coalition highlights that 11 major banks in Indonesia have inadequately implemented sustainable finance policies. The five top-ranking banks in Indonesia still fall within the “highly inadequate” and “inadequate” categories, scoring between 1.9 and 3.6 out of 10 based on criteria assessed under the Fair Finance Guide International (FFGI).
Purpose of the exclusion list
- Limit funding or investment by financial institutions towards corporations that are indicated to cause negative impacts in the context of ESG.
- Ensuring portfolios of financial institutions align with sustainability values and principles.
- Encouraging corporations in forest-risk sectors to enhance ESG standards to meet investment criteria before securing funding.
- Protecting the reputation of financial institutions from potential associations with controversial or unethical entities or activities.