Indonesia is tapping into sovereign Green Sukuk for financing biodiversity

Indonesia green sukuk

The government of Indonesia issued its first Islamic ‘green’ sovereign bond known as Green Sukuk in early 2018, listed on the Singapore Stock Exchange and NASDAQ Dubai. It has attracted investment of around US$ 1.25 billion.  The green bond and green sukuk framework that was recently developed has set criteria of eligible green projects to be financed.

Green projects under the green sukuk refer to those which promote the transition to a low-emission economy and climate resilient growth, including climate mitigation, adaptation, and biodiversity conservation in accordance to green sukuk framework’s criteria and process.

BIOFIN is heavily involved in supporting the development of the framework and process for implementation of the green sukuk. It held a workshop in mid-December attended by directorates of ministries and government institutions with projects related to biodiversity and conservation, such as The Ministry of Environment and Forestry, the Indonesian Institute of Sciences, Ministry of Agriculture, as well as the Ministry of Maritime Affairs and Fisheries.

The workshop was opened by Ms Dwi Irianti Hadiningdyah, Director of Sharia Financing, Directorate General of Budget Financing & Risk Management (DJPPR), Ministry of Finance, Republic of Indonesia.

"The sovereign green sukuk issuance marked Indonesia as the biggest sukuk issuer in the Global sukuk market as of December 2018, with a total value of US$ 16 billion," said Ms Dwi.

"For the next issuance, the directorate is going to tap into the potential of financing biodiversity," she said.

BIOFIN's green sukuk consultant, Mr Muchammad Muchtar, established that the current green sukuk has provided a framework for biodiversity financing through some of its existing components. Therefore, in the short term, BIOFIN is encouraging related ministries and government institutions to include biodiversity tagging into the existing climate mitigation and adaptation budget framework.

The next step for BIOFIN is to prepare biodiversity tagging for all related ministries so that all conservation activities can be financed through the green sukuk. In the long term, the aim is for Indonesian biodiversity to be recognized as national assets.

See an infographic about the Green Sukuk here.