The Role of Green Finance to Accelerate Net-Zero Emission Initiatives in the Palm Oil Sector

Abstract

The palm oil sector contributes significantly to global greenhouse gas (GHG) emissions, primarily through deforestation, peatland conversion, and unsustainable land-use practices. Despite mounting international pressure and voluntary sustainability pledges, decarbonization efforts in the industry remain fragmented and underfunded. This study aims to explore the potential role of green finance in supporting net-zero emission initiatives within the palm oil sector by examining how financial mechanisms, regulatory frameworks, and technological tools interact to facilitate sustainable transitions. This research employs a qualitative literature review method, focusing on peer-reviewed journal articles, policy papers, institutional reports, and international frameworks published between 2015 and 2025. Data collection was carried out through systematic sourcing from academic databases such as Scopus, Web of Science, and Google Scholar. Thematic analysis was then used to synthesize the key findings into structured categories, including emissions profiles, financing trends, policy dynamics, ESG integration, and technological readiness. The results show that green finance mechanisms such as green bonds, sustainability-linked loans, and blended finance are emerging but remain insufficient to meet the estimated USD 20–25 billion needed for a low-carbon transition in the sector. Barriers include limited access for smallholders, weak monitoring infrastructure, inconsistent ESG criteria, and low financial institution readiness. This study concludes that strengthening ESG governance, improving monitoring systems, and enhancing smallholder inclusion are critical for aligning palm oil production with net-zero goals. Future research should investigate region-specific financial innovations and stakeholder collaboration models.