In terms of structure, the green bond is no different to other conventional bonds. The main difference is that it is aimed at financing environmental friendly projects, such as renewable energy, environmental conservation and construction of energy-saving buildings.

OJK commissioner for capital market supervision Hoesen said on Friday that at least two companies had met with him to ask for more information about the new instrument. However, he refused to mention the names.

“We have received significant interest from companies about the green bond but as far as I know two companies have come to me to discuss. Their names are confidential,” he said.

He added that the companies were asking for incentives to issue the green bonds, particularly tax incentives.

“They mostly asked about tax incentives, as well as other incentives such as listing fee discounts on the Indonesia Stock Exchange [IDX],” Hoesen said.

In addition to private sector actors, the government has also shown interest in issuing its first green bonds, with the first issuance scheduled for this year.

“We are preparing for it, hopefully this year,” The Finance Ministry’s director of government securities Loto Srinaita Ginting said.

She explained that the bond would be based on environmentally friendly projects. The government is currently examining which project could be proposed for the bond.

“We have two options for the underlying project; it could be a totally new or an existing one, but it will be financed with the green bond,” she said.

Loto added that to be certified as a green project, it had to pass an assessment from an independent assessor, and that the government had appointed a foreign independent assessor to certify the project.

“As long as the independent assessor labels the project as environmentally friendly we can use it as the underlying project for the green bond,” she said.

In terms of marketing, the government will position the green bond as a complementary product instead of an alternative to conventional bonds.

“The green bond is an additional flavor. The usual investors will keep buying our bonds whether they are a green or not because our debt rating is getting better. But with the green bond we can aim for more investors who have a high degree of ethical consciousness,” she said.

She added that as most ethically minded investors were from abroad, the government had considered having the green bond denominated in foreign currencies.

Major rating agency Fitch Ratings upgraded Indonesia’s credit ratings by a notch to its lower investment grade last December due to the latter’s sound macroeconomic and monetary policies. The country’s rating was upgraded to BBB from BBB-, with a stable outlook.

Businesses are showing a growing appetite for the issuance of bonds as an alternative source of funding, particularly with the country’s improved debt rating over time.

For the first half, the government has a financing need of Rp 856 trillion (US$59.92 billion). Out of this need, around 17 percent to 20 percent will be in foreign currencies.

“The currency mix will depend on the demand from domestic investors. If the demand decreases, we will increase the portion of foreign currency-denominated bonds,” Loto said.

The government will issue the global bonds in three markets; the United States, Europe and Japan. All foreign-denominated bonds for the first half will be issued early in the first quarter.

Loto said the early issuance was to anticipate global pressure, especially from the US. The Federal Reserve (Fed) had planned to increase its reference rate by three times.

“As everybody knows, The Fed Fund Rate will be increased three times this year and The Fed also has a plan to shrink its balance sheet under a normalization policy,” she said.

Under the policy, the reserve bank will sell securities it purchased during the quantitative easing program launched in December, 2008. This will create a fund inflow to the US, which will then increase the demand for the US dollar and weaken the exchange rate of other currencies.

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