The IFC, as the sole investor of the bond, has committed US$150 million in green bonds issued by OCBC NISP to fund projects that help combat climate change across the archipelago. The green bond will be the first of its kind issued by a commercial bank in Indonesia.

“We believe that this first green bond will help create a market for green bonds in Indonesia,” said IFC CEO Philippe Le Houérou at the Indonesia Stock Exchange in Jakarta on Wednesday.

“This bond creates a new asset class to raise private capital to help combat climate change and spur Indonesia’s [transition] to a low-carbon economy,” he added.

Asif Mustaqim, IFC principal investment officer for the Asia Pacific, further explained that there were eight categories of asset classes that could be financed using green bonds, namely energy efficiency, transportation, water treatment, air and environmental projects, green buildings, manufacturing, agriculture and recycling.

However, OCBC NISP, a subsidiary of OCBC Singapore, will focus on the financing of green buildings, energy efficiency and wastewater treatment. The green bond issuance is an early step for bank in its effort to help clients develop their businesses in a more sustainable way.

“The projects [that will be financed] will be related to [the development of] green buildings or [waste management for] manufacturing industries. The locations have not been decided yet […] but they could possibly be in Jakarta, Sumatra and Sulawesi,” OCBC NISP president director Parwati Surjaudaja told The Jakarta Post in a text message on Wednesday.

In addition to its investment, the IFC will also provide support to OCBC NISP in the form of capacity building to help it identify green assets.

“Together with the IFC, we are looking forward to further collaborating and finding innovative solutions that widen opportunities for economically, socially and environmentally sustainable private investment,” Parwati said in a statement.

Beyond the partnership with OCBC NISP, the IFC is also looking to provide more funding for Indonesian banks in order to develop green financing products in the country going forward.

Despite being relatively new in the green bond market, Indonesia had potential as a strong market for the bond, the IFC said.

The international financial institution estimated that the country would reach around $272 billion in green financing by 2030.

The impact of climate change will be dramatic as it is estimated that, by the end of this century, climate change will cost Indonesia between 2.5 and 7 percent of the GDP every year.

The government, meanwhile, is committed to reducing gas emissions by 29 percent and drawing 23 percent of its power from renewable resources by 2025.

The IFC has been a major player in the green bond market globally, having invested in green bonds throughout Southeast Asia, such as in the Philippines and Thailand.

“We are also working with a number of banks across the region. Last December, we issued the first green bond in the Philippines with a bank called BDO,” Vivek Pathak, the IFC East Asia and Pacific Department director, said, referring to Philippine-based private lender Banco de Oro, one of the largest banks in the country.

Furthermore, the IFC invested in TMB Bank, one of the leading banks in Thailand, several months ago. Funds from the investment will be used to finance renewable energy projects.

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