Profitability Impact Of Reducing Coal Lending Exposure: A Scenario Analysis of Bank Permata's Sample Loan Portfolio

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🔬研究者:Provides a replicable scenario-based modeling framework for quantifying financial effects of coal phase-out in emerging market banking.

🏢実務担当者:Offers a practical approach for banks to evaluate profitability impacts and mitigation strategies when reducing coal lending exposure.

🏛政策担当者:Highlights the need for clear green taxonomy and transition pathways to support banks in reallocating capital without undermining financial stability.

The global shift toward a low-carbon economy has intensified regulatory, market, investor, and societal pressures on banks to align lending portfolios with sustainable finance principles. In Indonesia, where coal remains central to the energy mix, banks face a strategic trade-off between sustaining profitability from coal financing and complying with green taxonomy requirements. This study evaluates the profitability implications of the coal sector phase-out for Bank Permata, a leading Indonesian commercial bank, and examines mitigation strategies. The analysis integrates Signaling Theory, Resource Dependence Theory, Stakeholder Theory, and Sustainable Finance to frame the strategic, risk, and stakeholder considerations in portfolio reallocation. A quantitative scenario analysis was applied to four publicly listed coal companies with existing credit facilities at Bank Permata, which were selected as a sample. Using a profit planning approach, financial projections were developed for income statements, balance sheets, and cash flows based on public disclosures and validated assumptions. Results were compared across a baseline (no phase out) and three phase out scenarios, with the most stringent targeting zero exposure by 2030. Findings indicate that phasing out in the short term will affect declines in interest income, driven by reduced loan balances and yields, but highlight long-term benefits through reduced regulatory non-compliance risk and lower reputational exposure to transition risks. Potential losses can also be mitigated by reallocating to green taxonomy-aligned sectors with competitive yields. The research offers a replicable scenario-based modeling framework for quantifying the financial effects of coal phase-out strategies in emerging market banking. It underscores the importance of strategic portfolio realignment, diversification into sustainable sectors, and strengthened ESG risk assessments to maintain profitability while supporting national and global sustainability goals.

• openaire https://doi.org/10.58229/jims.v3i2.399first seen 2026-05-05 19:07:35