According to the London-based Climate Bonds Initiative, USD 155 billion of green bonds were sold in 2017, proceeds from which are allocated for investments in environmentally friendly and climate positive projects.

The first in Asia

So far only a handful of governments have committed to the green bond initiative including those of Poland and France. In Asia, however, Indonesia has become the first country to take a bold step in a green direction by selling USD1.25 billion in five-year green Sukuk-bonds in compliance with Islamic finance norms.

CIMB, Citigroup, Dubai Islamic Bank, PJSC, HSBC and Abu Dhabi Islamic Bank are all book runners on the deal according to Reuters.

Deal Street Asia report the deal carried a coupon of 3.75% and that no financing would go to fossil fuel based infrastructure, nor projects involving the burning of peat. Proceeds from Indonesia's green bonds would be used to finance projects such as renewable energy, green tourism and waste management.

Luky Alfirman, head of the Budget Financing and Risk Management office at Indonesia‘s Finance Ministry told reporters the Indonesian government has also said it will take up more projects to address climate change mitigation and adaptation, which requires alternative financing. 

Selling a 10-year sukuk bond at the same time as the green deal raised an additional USD 1.75 billion. The longer-dated paper sold with a coupon of 4.4%.

Where there's a will there's a way

Indonesia is the world’s biggest exporter of coal used to generate power and the fifth largest emitter of greenhouse gases, which are largely blamed for regular forest fires on the commodity-rich islands of Sumatra and Kalimantan where local farmers use slash-and-burn techniques to clear land for plantations (usually for pulp and paper or palm oil plantations).

The fall-out from these fires has had a direct and negative impact on neighbouring countries such as Malaysia and Singapore in recent years.

But this can change when the political will is there.

President Joko Widodo has committed to cut emissions by at least 29% by 2030 and he's also approved a two-year extension to a moratorium on issuing new licenses to use land designated as primary forest. Both of these are significant.

Keeping to commitments

Indonesia has also set targets to cut the use of dirty coal in energy and aims for renewables to make up nearly one-quarter of its energy mix by 2025, from the current 12%, with around 1,800 MW of wind projects targeted for completion.

In fact, the largest wind-farm in Southeast Asia developed by AC Energy from The Philippines, partnered with UPC Renewables Indonesia Ltd, will be commissioned in the next couple of months at the Sidrap project in South Sulawesi according to PLN, Indonesia's state-run electricity company. All 30-wind turbines have been installed and 24 have received certificates of operational worthiness.

The Sidrap plant will have a power capacity of 75 MW, and be able to distribute electricity to 67,000 customers with an average of 1,300 VA of power per customer.

Sources: Reuters, Southeast Asia Globe, Deal Street Asia, Indonesia Investments, The Jakarta Post, Metro TV, News Energy Indonesia

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