The Legal Framework for OJK Supervision in Preventing Greenwashing Practices in Sustainable Finance Products in the Banking Sector
DOI:
https://doi.org/10.24252/al-risalah.vi.66917Keywords:
greenwashing, sustainable finance, Financial Services Authority supervision, banking sector, regulatory frameworkAbstract
This research analyzes the legal construction of Financial Services Authority supervision in preventing greenwashing practices in sustainable finance products within Indonesia's banking sector. Normative legal research methods with statute and conceptual approaches examine the synchronization of regulations related to sustainable finance supervision. The findings reveal that POJK Number 51/POJK.03/2017 lacks comprehensive green taxonomy and rigorous verification mechanisms for sustainability claims. The Financial Services Authority's supervisory powers remain suboptimal due to absent specific technical standards, limited capacity in environmental, social, and governance risk assessment, and weak administrative sanction enforcement. Greenwashing practices manifest through report narrative manipulation and inconsistent financing classifications. This research recommends establishing an Indonesian green taxonomy with clear technical criteria, revising POJK 51/2017 to include granular disclosure obligations and independent verification mechanisms, strengthening supervisory capacity through specialized human resource development and technology utilization, and providing fiscal incentives to encourage genuine portfolio transformation toward sustainable economic activities.
References
Aras, G. (2024). Sustainable finance for sustainable development: Regulations, theory and practice. Taylor & Francis.
Berrou, R., Dessertine, P., & Migliorelli, M. (2022). An overview of green finance. In M. Migliorelli & P. Dessertine (Eds.), The rise of green finance in Europe: Opportunities and challenges for issuers, investors and marketplaces (pp. 3–29). Springer. https://doi.org/10.1007/978-3-030-22510-0_1.
Bodellini, M. (2023). Greenwashing and the misapplication of Articles 8 and 9 of the Sustainable Finance Disclosure Regulation. ERA Forum, 24(1), 27–42. https://doi.org/10.1007/s12027-023-00739-8
Chandra, J. A., Sacipto, R., & Muktiono, M. (2022). An Analysis of the Government’s Role in Greenwashing Practices within ESG-Based Sustainable Financial Investment Strategies. Panorama Hukum Journal, 7(2), 138–146. https://doi.org/10.21067/jph.v7i2.7584
Dias, G. F. (2022). Sustainability and sustainable finance: A regulator’s perspective and beyond. In P. Câmara & F. Morais (Eds.), The Palgrave handbook of ESG and corporate governance (pp. 217–229). Springer. https://doi.org/10.1007/978-3-030-99468-6_11
Financial Services Authority Regulation No. 51/POJK.03/2017 on the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies. (2017)
Financial Services Authority. (2024). Indonesian Banking Statistics 2024.
Firmansyah, A., & Puspitasari, A. (2025). Sustainable finance and green banking disclosure: Unlocking firm value potential. Riset, 7(1), 172–190. https://doi.org/10.37641/riset.v7i1.2591
Galletta, S., Mazzù, S., Naciti, V., & Paltrinieri, A. (2024). A PRISMA systematic review of greenwashing in the banking industry: A call for action. Research in International Business and Finance, 69, 102262. https://doi.org/10.1016/j.ribaf.2024.102262
Kartika, R., & Tinia, A. G. (2025). Factors Influencing the Adoption of Green Finance in the Indonesian Banking Sector. Accountability: Journal of Economic Sciences, 17(2), 17–27.
Law of the Republic of Indonesia No. 21 of 2011 on the Financial Services Authority. (2011).
Law of the Republic of Indonesia No. 8 of 1999 on Consumer Protection. (1999).
Merliyana, R. D. (2024). The role of governance and regulation in shaping ESG disclosure quality. Summa: Journal of Accounting and Tax, 2(3), 89–100. https://doi.org/10.61978/summa.v2i3.947
Mezzanotte, F. E. (2025). Persuasion and deterrence: Enforcing sustainable finance provisions. Law and Financial Markets Review. https://doi.org/10.1080/17521440.2025.2601367
Ministry of National Development Planning. (2020). Presidential Regulation No. 18 of 2020 on the 2020–2024 National Medium-Term Development Plan.
Mugisana, R., Septifani, E. N., & Sari, L. A. N. (2025). Greenwashing in ESG disclosure: A systematic literature review through theoretical and bibliometric analysis. Wahana Accounting Journal, 20(2), 157–170. https://doi.org/10.21009/wahana.20.0212
Nanlohi, Y. B., Susanto, M. W., Haqq, D. S. A., Nandito, I. A., & Rachmawati, T. (2025). Examining the Greenwashing Behind the ESG Hype: A Case Study of Retail Investors’ Perceptions and Experiences in Indonesia. Anggaran: Journal of Economics and Accounting, 3(2), 53–61.
Nugrahani, N., Syuliswati, A., Andhayani, A., Putra, I. L., & Widiati, S. (2025). Determinants of green banking disclosure state banks. Jamanika (Journal of Business Management and Entrepreneurship), 5(1), 86–100. https://doi.org/10.22219/jamanika.v5i1.39823
Pan, T., & Lin, B. (2025). Research on the mechanism of improving the energy-saving effect of green credit policy: Greenwashing behavior and financial supervision. Energy, 327, 136485. https://doi.org/10.1016/j.energy.2025.136485
Prihandono, I., & S. Yuniarti, D. (2023). Indonesia Sustainability Reporting Standard: What Needs to be Improved?. Padjadjaran Journal of International Law, 7(1), 1-23. https://doi.org/10.23920/pjil.v7i1.1159
Ramdhan, D. (2025). The role of ESG disclosure in attracting sustainable investment in Indonesia’s capital market. RIGGS: Journal of Artificial Intelligence and Digital Business, 4(3), 3384–3393. https://doi.org/10.31004/riggs.v4i3.2484
Setyorini, M., & Hakam, D. F. (2025). The impact of green banking activities on environmental performance. Journal of Risk and Financial Management, 18(10). https://doi.org/10.3390/jrfm18100558
Sharma, S., Gupta, C., Malhotra, R. K., & Upreti, H. (2024). Sustainable banking practices: Impact, challenges and opportunities. E3S Web of Conferences, 556. https://doi.org/10.1051/e3sconf/202455601031
Siagian, R. P., Arista, P. P., & Faradila, Y. N. (2025). Green investment or greenwashing? Foreign investment in Indonesia’s renewable energy sector. Liberatica, 23–33.
Sneideriene, A., & Legenzova, R. (2025). Greenwashing prevention in ESG disclosures: A bibliometric analysis. Research in International Business and Finance, 74, 102720. https://doi.org/10.1016/j.ribaf.2024.102720
Sutanto, A., Ermawati, W. J., & Anggraeni, L. (2025). Assessing the impact of sustainable finance regulation on bank risk. Journal of Accounting and Strategic Finance, 8(2), 209–234. https://doi.org/10.33005/jasf.v8i2.657
Yuliyansa, W., & Fitri, A. O. (2025). Environmentally Conscious Islamic Banking: An Analysis of the Opportunities and Challenges of Green Banking. Academic Media Journal, 3(5), 1–9.
Zetzsche, D. A., & Anker-Sørensen, L. (2022). Regulating sustainable finance in the dark. Springer.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Muhammad Ibnu Ronggo Batutah, Ucuk Agiyanto, Azis Akbar Ramadhan
This work is licensed under a Creative Commons Attribution 4.0 International License.
