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THE INDONESIA’s GREEN SUKUK INITIATIVE

THE INDONESIA’s GREEN SUKUK INITIATIVE. INDONESIA’S CLIMATE CHANGE VULNERABILITY.

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THE INDONESIA’s GREEN SUKUK INITIATIVE

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  1. THE INDONESIA’s GREEN SUKUK INITIATIVE

  2. INDONESIA’S CLIMATE CHANGE VULNERABILITY Indonesia is the world’s largest archipelago comprising over17,508 ISLANDS. Covering an area of about 790 millionhectares with a total coastline length of95.181 KM and a land territory of about 200 millionhectares. 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 ofincreasing 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 availablefinancial resources to support GoI commitments in financing climatechange activities is apparent. Estimated cost of climate change mitigation and adaptation actions 2015-2020 are $81 billion Financial resources allocated for both mitigation and adaptation actions 2015 - 2019, are $55.1 billion Source: NDC,2017 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 BONDadded 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 USD389bn 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.

  8. 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 Pillar III: Management of Proceeds MEDIUM GREEN REVIEW BY CICERO one of the world’s leadinggreen 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 • Benchmarks for Green Framework: • Poland • Fiji • France

  9. 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, RoIhas issued Green Sukuk of (or IDR 16.75 trillion) The five-year Global Green Sukuk is noted as the world’s first sovereign green Sukuk.

  11. EXAMPLES OF GREEN PROJECTS

  12. UNDP SUPPORT AND PARTNERSHIP ON THE GREEN SUKUK INITIATIVE PRE ISSUANCE POST ISSUANCE

  13. GOING FORWARD

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

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