Driving Public & Private Capital Towards Green & Social Investments in Indonesia
By 2100, climate change is expected to result in up to a 7% drop in Indonesia’s GDP, yet 38% of the country’s Nationally Determined Contributions (NDC) to the Paris Agreement remain underfunded. Indonesia requires around USD 20.6 billion annually to implement climate action by 2030. If funding gaps are not addressed, Indonesians will experience direct negative impacts from climate change. These negative impacts will directly harm Indonesia's most vulnerable populations and particularly women. Market failures and the lack of enabling environment are impeding public and private investments at scale.
The programme will create a new generation of financial products to combat climate change at scale, by transitioning the country towards low impact energy, protecting the environment, and empowering the creation of women led small businesses and a new generation of impact-driven enterprises. The programme will bring to scale proven and new financing instruments (thematic bonds, impact funds, and SDG-linked loans) and develop the capacities of critical stakeholders. Firstly, the programme will support the expansion of thematic bond issuances and green sukuk to new sectors (e.g. Blue and SDG bonds) and take bond issuances to the subnational level. The programme will collaborate with a network of 14 banks under ISFI to launch SDG-linked loans for SMEs. Secondly, it will support banks as they launch the SDG-linked products, including through the creation of a green/SDG catalogue, which will streamline loan approval systems and provide metrics for measuring impact. Thirdly, the programme will capitalise the growing impact investment ecosystem by operationalising an impact fund in collaboration with Mandiri Capital Indonesia, and the Indonesia APEC Business Advisory Council.
The innovative financing instruments deployed will contribute to accelerating development in the underfunded sectors, including climate mitigation & adaptation, water & sanitation, and marine resource management, as well as ensuring gender inclusiveness and benefiting vulnerable communities. The targets include 5 SDG-thematic bonds issued, 80 SDG-linked loans disbursed, 1,250 SMEs supported with a prioritization of women-owned and women-led businesses, and 60 impact driven start-ups accessing early-stage financing and 140 graduating from accelerator programmes.
- This programme will be implemented through robust partnerships with:
- Government: Ministry of Finance and Financial Services Authority (OJK)
- Private Sector: Mandiri Capital Indonesia and Bank Rakyat Indonesia (BRI)
- International Financial Institutions: Asian Development Bank (ADB)
- CSO: Association for Women in Small Business Assistance