Church Commissioners, KLP, Legal & General Investment Management, Robeco and more than 30 other institutional investors have written to Indonesian authorities expressing concern that a bill aimed at attracting more foreign direct investment will weaken environmental protection regulations and lead to more deforestation.

In the letter, the investors said they feared that changes proposed in the Omnibus Bill on Job Creation would have “severe environmental, human rights and labour-related repercussions that introduce significant uncertainty and could impact the attractiveness of Indonesian markets”.

“We recognise Indonesia’s progress in protecting tropical forests in recent years, yet the proposed legislation could hamper these efforts.”

They said protecting tropical forests was vital for combatting climate change, the degradation of ecosystems and biodiversity loss, “all of which pose systemic and material risks to our portfolios as well as to the health of our societies, economies, and environment”.

“Additionally, the strong correlation between environmental degradation and the increased occurrence of zoonotic diseases like COVID-19 reinforces investors’ desire for a sustainable recovery from this pandemic that reduces the risk of future such events,” they wrote.

The proposed regulatory changes also risked undermining Indonesia’s ability to meet its Nationally Determined Contributions to the Paris Agreement, the investors said.

They asked for a video call to discuss their position “and how we can work together to develop a way forward”.

Peter van der Werf, senior engagement specialist at Robeco and one of the main drivers of the initiative, said the aim was to have a “constructive dialogue with the Indonesian government, to make sure that the new legislation delivers the business reform but at the same time continues to protect natural resources in Indonesia”.

“How Indonesia deals with deforestation and climate change is not only relevant from a global perspective, but also a financially material topic for us,” he said.

Other investors that have signed the statement include Aviva Investors, Actiam, BMO Global Asset Management, the Church of England Pensions Board, NN Investment Partners, Storebrand Asset Management and Sumitomo Mitsui Trust Asset Management.

The Local Authority Pension Fund Forum is also supporting the initiative. An Indonesian investor, Maitri Asset Management, is said to have come on board today. 

Earlier this year some of the same investors were involved in talks with the Brazilian government about deforestation.

To read the digital edition of IPE’s latest magazine click here.