Indonesia Esg Investing Market Report: Size, Share, Growth Drivers, Trends, Opportunities & Forecast 2025-2030

Indonesia ESG investing market is valued at USD 6.1 billion, driven by sustainability awareness and green bonds, with growth in institutional investments and regulatory support.

The Indonesia ESG investing market is valued at USD 6.1 billion, based on a five-year historical analysis. This growth is primarily driven by increasing awareness of environmental, social, and governance factors among investors, alongside a rising demand for sustainable investment options. The market has seen a significant influx of capital as institutional and retail investors seek to align their portfolios with sustainable practices and responsible investing principles. Notably, the expansion of ESG-themed mutual funds and the rise in sustainable bond issuance have contributed to this market growth, reflecting a broader regional trend of integrating ESG considerations into mainstream investment strategies.

Key cities such as Jakarta, Surabaya, and Bandung dominate the Indonesia ESG investing market due to their economic significance and concentration of financial institutions. Jakarta, as the capital, serves as a hub for investment activities, while Surabaya and Bandung are emerging as important centers for sustainable business initiatives, attracting both local and foreign investments in ESG-compliant projects.

The Sustainable Finance Roadmap (OJK Roadmap for Sustainable Finance Phase II, 2021-2025) issued by the Financial Services Authority (Otoritas Jasa Keuangan, OJK) sets out binding requirements for financial institutions to integrate sustainability into their business strategies. This regulation mandates the preparation of sustainable finance action plans, annual sustainability reporting, and encourages the issuance of green, sustainability, and sustainability-linked bonds, thereby fostering a conducive environment for ESG investments and promoting responsible business practices across the country.

Indonesia ESG Investing Market Segmentation

By Type:

The market is segmented into various types, including equity funds, fixed income funds, real estate investments, green bonds, sustainability bonds, sustainability-linked bonds, ESG index funds, impact funds, and others. Among these, equity funds and green bonds are particularly prominent, driven by investor preferences for high-growth potential and environmentally focused projects. The growth in sustainable bonds - including green, sustainability, and sustainability-linked bonds - has been especially notable, with diversification in issuance types and increased participation from both corporate and government issuers.

By End-User:

The end-user segmentation includes institutional investors, retail investors, corporations, and government entities. Institutional investors are leading the market, driven by their growing commitment to sustainable investing and the integration of ESG criteria into their investment strategies. Local institutional investors, in particular, are increasingly incorporating ESG metrics into portfolio management, supported by regulatory guidance and the introduction of ESG indices such as IDX ESG Leaders and SRI-KEHATI.

Indonesia ESG Investing Market Competitive Landscape

The Indonesia ESG investing market is characterized by a dynamic mix of regional and international players. Leading participants such as Mandiri Investasi (Mandiri Investment Management), Danareksa Investment Management, Bahana TCW Investment Management, Schroders Indonesia, BNP Paribas Asset Management Indonesia, Principal Asset Management Indonesia, Manulife Aset Manajemen Indonesia, Allianz Global Investors, RHB Asset Management Indonesia, Eastspring Investments Indonesia, Trimegah Asset Management, Sucorinvest Asset Management, Batavia Prosperindo Aset Manajemen, MNC Asset Management, Ashmore Asset Management Indonesia contribute to innovation, geographic expansion, and service delivery in this space.

Indonesia ESG Investing Market Industry Analysis

Growth Drivers

Increasing Awareness of Sustainability:

The Indonesian population's awareness of sustainability has surged, with 75% of consumers prioritizing eco-friendly products in future. This shift is supported by the World Bank's report indicating that Indonesia's environmental sustainability index improved by 20% in recent years. As a result, businesses are increasingly adopting sustainable practices, driving demand for ESG investments. This growing consciousness among consumers is compelling companies to align their operations with sustainable principles, thus enhancing the ESG investment landscape.

Government Support for Green Investments:

The Indonesian government has committed to increasing green investments, targeting $25 billion in renewable energy projects in future. This initiative is part of the National Medium-Term Development Plan, which aims to reduce greenhouse gas emissions by 29% in future. Additionally, the government has introduced various incentives, including tax breaks for companies investing in sustainable technologies, fostering a conducive environment for ESG investments and attracting both domestic and foreign investors.

Rising Demand from Institutional Investors:

Institutional investors in Indonesia are increasingly integrating ESG criteria into their investment strategies, with assets under management in ESG-focused funds reaching IDR 200 trillion (approximately $13.5 billion) in future. This trend is driven by a growing recognition of the financial benefits associated with sustainable investments, as evidenced by a 25% higher return on ESG-compliant portfolios compared to traditional investments. This shift is reshaping the investment landscape, encouraging more capital flow into ESG initiatives.

Market Challenges

Lack of Standardization in ESG Metrics:

One of the significant challenges facing the Indonesian ESG investing market is the absence of standardized ESG metrics. Currently, over 65% of companies report ESG data inconsistently, leading to confusion among investors. The lack of a unified framework hampers the ability to compare ESG performance across sectors, making it difficult for investors to make informed decisions. This inconsistency can deter potential investments, stalling market growth.

Regulatory Uncertainty:

Regulatory uncertainty poses a significant challenge to the ESG investing landscape in Indonesia. As of now, only 45% of companies comply with existing ESG regulations, primarily due to unclear guidelines. This uncertainty can lead to hesitance among investors, as they may fear potential penalties or changes in regulations. The need for clearer, more robust regulatory frameworks is essential to foster confidence and encourage greater participation in the ESG market.

Indonesia ESG Investing Market Future Outlook

The future of the ESG investing market in Indonesia appears promising, driven by increasing regulatory support and a growing emphasis on sustainability among corporations. As the government enhances its commitment to green initiatives, more companies are expected to adopt ESG practices. Additionally, the rise of impact investing will likely attract a new wave of investors focused on social and environmental outcomes. This evolving landscape will create a fertile ground for innovative financial products and services tailored to meet the demands of conscious investors.

Market Opportunities

Growth of Green Bonds:

The green bond market in Indonesia is projected to expand significantly, with issuances expected to reach IDR 75 trillion ($5.2 billion) in future. This growth is driven by increasing interest from both domestic and international investors seeking sustainable investment opportunities. Green bonds will provide essential funding for renewable energy and infrastructure projects, enhancing the overall ESG investment landscape.

Expansion of ESG-focused Funds:

The number of ESG-focused investment funds in Indonesia is anticipated to double in future, reaching 120 funds. This expansion is fueled by rising demand from institutional investors and retail clients who are increasingly prioritizing sustainability in their investment choices. The growth of these funds will facilitate greater capital allocation towards sustainable projects, further strengthening the ESG market.