The report by four NGOs alleges the ADB loan given in 2021 to Indonesia's state power company to fund its ten-year business plan and "promote the use of clean energy" has no clause blocking spending on new coal facilities.
The Perusahaan Listrik Negara (PLN) plan contains more than a dozen new coal projects, including an expansion at Java island's Suralaya, one of the biggest coal-fired plants in Southeast Asia, which will add two generating units to eight in operation.
"ADB's loan agreement doesn't just fail to exclude coal. It actually allows PLN to use ADB funding for coal-fired power plants," said Dustin Roasa, research director at Inclusive Development International, which published the report Wednesday.
"The loan's eligible expenditures expressly cover anything in PLN's 10-year plan, which does not shy away from new coal."
The report gives locals' accounts of how a previous expansion at Suralaya in Banten province neighbouring capital Jakarta "displaced families, reduced fish stocks... and sickened their children".
The impact of pollution from Suralaya costs Indonesia $1 billion every year because of preventable deaths, work absences and medical costs, a study published last year by the Europe-based Centre for Research on Energy and Clean Air (CREA) said.
"Publicly funded institutions like the Asian Development Bank must include robust coal exclusions in contracts... in order to end coal finance for good," said Daniel Willis, finance campaigner at NGO Recourse.
The report said the loan entered PLN's general bank account and was not put into a separate account that could be monitored, allowing it to be spent however PLN wants. It did not claim the loan was directly used to fund Suralaya.
An ADB spokesperson said the loan agreement does "not include support for coal-fired power plants," adding that it was a results-based loans in which the borrower must achieve certain targets including promoting clean energy before the loan tranches are disbursed.
"The loan does not violate ADB's energy policy," the spokesperson said.
PLN did not respond to an AFP request for comment about the report, which was released ahead of ADB's annual meeting in Georgia next week.
The bank provides loans and grants for projects in the poorest countries in the Asia-Pacific region and has pledged to not fund "new coal-based capacity for power and heat".
The ADB has a financing scheme for Asian governments to retire coal plants and in December agreed on a deal with the owners of the Cirebon-1 coal-fired power plant in Indonesia to shut it down seven years early.
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