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istorically, conventional wisdom states economic growth objectives are incompatible with environmental goals. However, in recent years, we have realized that if left unaddressed, economic growth that is not followed by environmental sustainability will have a negative impact on society.

We have witnessed the unprecedented and increasing threat of global warming. Rising temperatures that have resulted in climate change have already had a direct impact on Earth, such as rising sea levels, changing patterns of rainfall and evaporation, which potentially leads to flooding and drought in different places.

Without taking significant steps to counter the situation, by 2100, based on the projections of the Intergovernmental Panel on Climate Change, the average global surface temperature will increase by 4.5 degrees Celcius and sea levels will rise by 95 centimeters, which would eliminate the major landmass of archipelagic nations such as Japan, the Maldives, the Caribbean and our very own Indonesia.

Being close to the global conveyor system, Indonesia has a pivotal role in addressing climate change. This is mainly because with most people living in coastal areas, our nation is highly vulnerable to the impact of climate change. And given its extensive tropical land and seascape with high biodiversity, high carbon stock values and energy and mineral resources, the nation is at the forefront of climate action and environmental protection.

Indonesia is aware of the need to take a leading position in ensuring sustainable development and to mitigate climate change for the future generations. On the international stage, Indonesia has played active and constructive roles in climate negotiations. At the policy level, Indonesia has the ambitious plan to reduce its carbon dioxide emissions by at least 26 percent by 2020 from a business-as-usual baseline level. Indonesia also aims at reducing the use of coal as a source of energy and ensure that renewables account for 23 percent of our energy mix by 2025 and 31 percent by 2050.

President Joko “Jokowi” Widodo has set out Nawa Cita (nine-point development program) as a guide to Indonesia’s strategic development goals. This includes protecting citizens and providing a safe environment, developing rural areas, improving the quality of life, and increasing productivity and competitiveness. These objectives have been translated into the National Medium-Term Development Plan for 2015 to 2019, which provides guidance for ministries and government bodies in formulating strategic plans, and preparing and adjusting for the regional medium-term development plan, as well as preparing the government work plan.

Moreover, as one of the G20’s active members, Indonesia has made a number of commitments to step up its climate change adaptation and mitigation priorities, including ratification of the Paris Agreement in 2016 and the Nationally Determined Contributions that sets out Indonesia’s commitment to a low carbon and climate resilient future.

This year has become a milestone that further propels Indonesia’s active role in supporting sustainable development through its inaugural issuance of a Green Sukuk in February. The Green Sukuk is a means of aligning government funding with its commitment to the low-carbon transition, channeling funding to projects in renewable energy, energy efficiency, sustainable transport, waste management, conservation and other environmental priorities.

For the issuance, the Finance Ministry has developed a Green Bond and Green Sukuk Framework, which sets out the eligible projects to be funded, project selection process, management proceeds and reporting format. It has been reviewed by an independent reviewer, the Center for International Climate Research (CICERO), which has viewed this framework positively, indicating that the framework includes transparent reporting, including a list of projects and its environmental impact.

CICERO has also rated the framework with the shading of “medium green”, considering that the framework includes a broad range of projects that aim at meeting the climate change challenge in the long term. Moreover, this framework is aligned with the Green Bond Principles, the ASEAN Green Bond Standard and the new regulations issued by the Financial Services Authority (OJK) in relation to national green bonds.

On Feb. 22, Indonesia successfully issued a US$3 billion sukuk of which $1.25 billion was in Green Sukuk format. It was the world’s first ever Sovereign Green Sukuk issuance and the first ever international Green Offering by an Asian Sovereign. Indonesia has taken the leadership role among Asian countries on this climate change initiative that has received significant interest and positive feedback from the international community, evident by its oversubscription of 2.35 times and successfully priced at 30 basis points below the initial pricing guidance. The sukuk transaction was 29 percent subscribed by Green investors globally.

We should be proud of the action that Indonesia has taken to date on low carbon transition and we believe that the Green Sukuk issuance further demonstrates our commitment to sustainable development. We are pleased to see that the Green Sukuk has garnered high interest from global investors, a very good start to this new journey.

We intend to be a repeat issuer of Green Bonds and Sukuk, where market conditions allow. Furthermore, we hope that the inaugural issue of green instruments from the government will encourage follow-up issuances, not only from Indonesian corporations but also issuers from other jurisdictions. Together, let us make this world a better place to live in and ensure climate sustainability for our future generations.
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