Barriers and solutions to green bond issuance in Indonesia

The document identifies key obstacles to the growth of Indonesia's green bond market, including currency hedging costs, market illiquidity, and a lack of bankable green projects. It provides a roadmap of solutions involving government subsidies, MDB credit enhancements, and regulatory reforms to attract international investors.

• Indonesia's green bond market is the largest in ASEAN, accounting for 39% of total ASEAN issuance with a total of USD2.7bn as of April 2019.
• The Republic of Indonesia became the fifth nation globally to issue a green sovereign bond and the first to use the sukuk (Islamic bond) format with a USD1.25bn issuance in March 2018.
• Currency hedging is a significant barrier due to high collateral requirements for volatile currencies, limited liquidity for long-dated maturities (maximum five years for cross-currency swaps), and unpredictable costs driven by interest-rate differentials.
• The Indonesian bond market suffers from low liquidity and poor price discovery due to its over-the-counter (OTC) nature and high concentration, where the largest 30 corporate bonds represent 74% of total domestic bonds outstanding.
• Many green projects in sectors such as water, pollution control, and climate change adaptation are not considered bankable because of low profitability, lack of track records, and difficulties in land acquisition.
• Financial Services Authority (OJK) regulations for green bonds generally align with Green Bond Principles but differ by allowing up to 30% of proceeds to be used for general corporate purposes.

APA

Climate Bonds Initiative (2019). Barriers and solutions to green bond issuance in Indonesia. https://www.climatebonds.net/files/documents/publications/Unlocking-green-bonds-in-Indonesia-a-guide-for-issuers-regulators-and-investors.pdf

Chicago

Climate Bonds Initiative. Barriers and solutions to green bond issuance in Indonesia. 2019. https://www.climatebonds.net/files/documents/publications/Unlocking-green-bonds-in-Indonesia-a-guide-for-issuers-regulators-and-investors.pdf.

Wikipedia

{{cite report |author=Climate Bonds Initiative |title=Barriers and solutions to green bond issuance in Indonesia |date=December 2019 |url=https://www.climatebonds.net/files/documents/publications/Unlocking-green-bonds-in-Indonesia-a-guide-for-issuers-regulators-and-investors.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatebondsinitiative2019barriers, author = {{Climate Bonds Initiative}}, title = {{Barriers and solutions to green bond issuance in Indonesia}}, institution = {Climate Bonds Initiative}, year = {2019}, month = dec, url = {https://www.climatebonds.net/files/documents/publications/Unlocking-green-bonds-in-Indonesia-a-guide-for-issuers-regulators-and-investors.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }