1. THE INDONESIA’s GREEN SUKUK INITIATIVE

2. INDONESIA’S CLIMATE CHANGE VULNERABILITY
Indonesia is the world’s largest archipelago comprising over 17,508 ISLANDS. Covering an area of about 790 million hectares with a total coastline length of KM and a land territory of about 200 million hectares.
With its situation, Indonesia is highly vulnerable to the adverse impacts of climate change. Data collected on the average temperature variation across the entire region of Indonesia for the past years shows a trend of increasing temperature level.

3. INDONESIA’S CLIMATE CHANGE IMPACT
Climate change has a direct impact to aspect of lives; health, agriculture sectors and to the economy.

4. CLIMATE CHANGE COMMITMENT AND FINANCING REQUIREMENTS
The financial gaps between funding needs and currently available financial resources to support GoI commitments in financing climate change activities is apparent.
Financial resources allocated
for both mitigation and
adaptation actions
2019, are $55.1 billion
Estimated cost of climate
change mitigation and
adaptation actions
are $81 billion
Source: NDC, Source: TNC,2017

5. CLIMATE CHANGE BUDGET TAGGING (CBT)
LEGAL STANDING
With the support from UNDP, The Government of Indonesia firstly implemented CBT on State Budget FY 2016 and 2017 to 6 ministries mandated on RAN-GRK (National Action Plan on Mitigation). In 2018, it is expanded to include adaptation.
Minister of Finance Decree No. 142/2018
SYSTEM
CBT is integrated into the National Planning and Budgeting system.

6. CBT RESULTS
CLIMATE STATE PERCENTAGE
BUDGET BUDGET

7. GREEN BONDS & GREEN SUKUK
INNOVATIVE FINANCIAL INSTRUMENTS
GREEN SUKUK/ISLAMIC BOND added the Islamic/shariah-compliant requirement.
Green bonds market developed quite rapidly in recent years. Globally there is, up to now, USD 1.45tn climate aligned bonds with USD 389bn alone in green bond. (CBI, 2018)
SOVEREIGN BOND ISSUER: POLAND, FRANCE, FIJI, NIGERIA, INDONESIA
In Indonesia, climate budget tagging process enabled the government to initiate new financial instruments in combating climate change in a form of Green Bond and Green Sukuk.
This initiative is aligned with Indonesia’s aim to achieve SDGs goals.
(either by specifying the use of the proceeds, direct project exposure, or securitization)
Financial sector has a huge potential to play a forefront role in climate actions.

8. GREEN BOND/SUKUK FRAMEWORK
GREEN BOND & GREEN SUKUK FRAMEWORK
Four pillars to ensure the proceeds are used appropriately
Pillar I:
Use of Proceeds
Green Projects must fall into one of the nine eligible sectors
INDONESIA
GREEN BOND/SUKUK FRAMEWORK
Pillar IV:
Reporting
Pillar II:
Project Evaluation and Selection
MEDIUM GREEN REVIEW BY
CICERO
one of the world’s leading green bond reviewer
Reporting is expected to include measures of the reduction in greenhouse gas emissions
Budget Tagging Process to identify green projects
MoF as issuer should guarantee 100% of proceed used to finance green projects
Pillar III:
Management of Proceeds
Benchmarks for Green Framework:
Poland
Fiji
France

9. Sustainable Management of Natural Resource
ELIGIBLE SECTORS
Renewable energy
Resilience to
Climate Change
for Disaster
Risk Areas
Waste to
Energy &
Waste
Management
DARK GREEN
DARK GREEN
MEDIUM TO DARK GREEN
Sustainable
Agriculture
Sustainable
Transportation
Green
Tourism
MEDIUM TO DARK GREEN
MEDIUM TO DARK GREEN
MEDIUM TO DARK GREEN
Sustainable Management of Natural Resource
Energy
Efficiency
Green Building
LIGHT TO DARK GREEN
LIGHT TO MEDIUM GREEN
LIGHT GREEN

10. INDONESIA GLOBAL GREEN SUKUK
In March 2018, RoI has issued Green Sukuk of
(or IDR trillion)
The five-year Global Green Sukuk is noted as the world’s first sovereign green Sukuk.
One of remarkable achievement

11. EXAMPLES OF GREEN PROJECTS

12. Climate Budget Tagging
UNDP SUPPORT AND PARTNERSHIP ON THE GREEN SUKUK INITIATIVE
Climate Budget Tagging
Framework Development
Project Selection
PRE ISSUANCE
Capacity Buiding to Line Ministries
Campaign & Advocacy
Impact Reporting
Impact Manual
POST ISSUANCE

13. GOING FORWARD
Encouraging Government to issue more Bond in green format in the future, either Green Sukuk or Green Bond. We are also exploring opportunities to encourage issuance of a) subnational green bond/sukuk and b) Corporate green Sukuk/Bond
Continue to innovate, to look for new and innovative instruments and to diversify risks such as thematic bond and other Sustainable and Responsible Investment (SRI) instruments. For example, SDG bond and Waqf-Link Sukuk.
Championing and encouraging more issuance of new creative and innovative financing instruments, including from municipal, private sector and SOEs.

14. THANK YOU Joanne Manda Climate Finance Specialist
UNDP Bangok Regional Hub