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FEATURE STORYJuly 21, 2022

Indonesia’s First Sustainability Bond by a Non-Bank Financial Institution Focuses on Green and Inclusive Development

Indonesia’s First Sustainability Bond by a Non-Bank Financial Institution Focuses on Green and Inclusive Development

Balinese village with port, ferry ship and ocean. Aerial view

Adobe Stock - artifirsov


  • State-owned enterprises (SOEs) and national companies have an important tole to play in helping countries decarbonize infrastructure and mitigate the long-term effects of climate change.
  • The World Bank provided technical assistance to PT Indonesia Infrastructure Finance (IIF), a private national company and non-bank financing institution to facilitate the issuance of their first Sustainability Bond, mobilizing private sector capital to finance sustainable infrastructure.

With its tropical rainforests and long coastline, Indonesia is highly vulnerable to the impact of climate change, including floods and droughts, sea level rise, shifts in rainfall patterns, and increasing temperature. In its updated Nationally Determined Contributions for the Paris Agreement, Indonesia has committed to a greenhouse gas emissions reduction target of 29 percent unconditionally and 41 percent conditionally (with international support) and to ensure the climate resilience of its communities and ecosystems by 2030.

PT Indonesia Infrastructure Finance (IIF), a private national company and non-bank financing institution, is playing a vital role by supporting the flow of private capital into infrastructure development and reallocating resources from carbon-intensive to low-carbon and climate-resilient infrastructure. Established in 2010 by the Government of Indonesia, the World Bank Group, Asian Development Bank (ADB) and other multilateral institutions, IIF’s core purpose is to accelerate and improve private sector participation in Indonesia’s infrastructure sector by providing financing and advisory services.

“IIF’s mandate is to promote the development of a green, more resilient and sustainable economy and champion the implementation of ESG best practices in infrastructure projects in Indonesia,” says Reynaldi Hermansjah, President Director of IIF. “All IIF projects conform to internationally accepted standards, including Social and Environmental principles based on the IFC, ADB, and the World Bank standards.”

The World Bank has provided USD 300 million of investment project financing to IIF to date to  increase its capacity to finance infrastructure projects in Indonesia and manage social and environmental risks.

As IIF considered tapping the international capital markets for longer-term financing, issuing a Sustainability Bond with which they could raise awareness of their commitment towards environmental and social sustainability made sense. A Sustainability Bond supports investments in projects that generate positive social and environmental returns.

To issue the bond, IIF developed a Sustainable Financing Framework, defining 11 green and social categories of eligible projects and a transparent governance process compliant with the International Capital Markets Association standards. IIF listed the USD 150 million bond  on the Singapore Stock Exchange on January 28,  2021, attracting international investors. It was the first Sustainability Bond issued by a non-banking financial institution in Indonesia. The transaction received the Sustainability Bond of the Year award for 2022 in the category of Financial Institution from the trade publication Environmental Finance. 

According to IIF’s 2021 Sustainability Bond Impact report, 100 percent of the proceeds of the bond were allocated towards drinking water supply infrastructure,  renewable energy, healthcare, and telecommunication projects, including the 70 MW Wind Power Plant Project in South Sulawesi, the expansion of hospitals in Bekasi and Tangerang, and water infrastructure projects that provided 159,000 households in Gresik, Serang, and Pekanbaru with access to clean drinking water. The wind power plant project provided 200.7 GWh of renewable energy to the South Sulawesi national grid and contributed to Indonesia’s NDCs by reducing 190,724 tCO2eq greenhouse gas emissions in 2021.

The World Bank Treasury provided technical assistance (TA) to the IIF under its Sustainable Finance and ESG Advisory Services to support the design and preparation of the bond. The TA was provided as  part of the Infrastructure Financing Support - Capital Market and Risk Products project managed by the World Bank’s Finance, Innovation, and Competitiveness  Global Practice in Indonesia, under the Indonesia Infrastructure Finance Development program funded by the Global Affairs Canada and the Joint Capital Market Development (J-CAP) Indonesia program.

“We are delighted to have supported IIF in its journey towards sustainability,” says Satu Kahkonen, World Bank Country Director for Indonesia. “The World Bank has had a long-standing partnership with Indonesia and in recent years, we have been especially focused on developing the domestic capital markets and promoting supporting sustainable financing.”

According to Valerie Hickey, Director of Environment, Natural Resources, and Blue Economy, “Together with the Government of Indonesia and IIF, this is an example of how the World Bank’s targeted financing support and technical assistance to support robust public policy can attract commercial finance to green Indonesia’s economy and deliver benefits for people, the climate and nature. 

The IIF Sustainability Bond is one of the many thematic bond transactions supported by the World Bank Treasury, including sovereign and sub-sovereign bonds issued by Indonesian, Malaysian, Fijian, Egyptian, and Colombian issuers.

“We issue bonds in the capital markets to raise financing for the World Bank’s lending portfolio, and we are proud to help emerging market issuers mobilize private sector financing for sustainable development projects,” says George Richardson, Director of the Capital Markets and Investment Department of the World Bank Treasury.

With this issuance, IIF joins a growing number of SOEs and national companies mobilizing the capital markets to finance investments in sustainable infrastructure, including the National Housing Authority in Thailand, which issued a social bond in 2020 and the Société du Grand Paris which has adopted a 100 percent green bond financing program to finance the construction of eco-friendly transport infrastructure in the Greater Paris area. Such issuances are essential not only for mobilizing financing for sustainable development but also for developing sustainable capital markets and paving the way for the private sector to follow their lead.


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