Indonesia Launches the World’s First Publicly Offered Sovereign Blue Bond

In May 2023, Indonesia issued a first-of-its-kind Blue Bond in the Japanese debt capital market, raising JPY 20.7 billion (US$ 150 million). This issuance marks the world’s first publicly offered sovereign Blue Bond aligned with International Capital Market Association (ICMA) principles. Its issuance demonstrates Indonesia’s commitment to tapping innovative sources of financing for investments that benefit communities and the sustainable use of marine ecosystems – the blue economy.

The bond was issued both with 7-year and 10-year maturity periods, with 1.2 and 1.43 percent coupon rates respectively. The proceeds from this bond issuance will provide a much-needed boost to Indonesia’s blue economy, including coastal protection, sustainable management of fisheries and aquaculture, marine biodiversity conservation and mangrove rehabilitation.

“Thematic bonds can play a significant role in addressing the SDGs financing gap, especially in developing countries, since they enable access to private capital while ensuring that proceeds contribute to sustainable development impact. Since 2018, we have continuously leveraged and expanded our thematic bond portfolio – this inaugural Blue Bond issuance further signifies our commitment and pioneering role in ensuring the achievement of the country’s 2030 agenda" said Sri Mulyani Indrawati, Indonesia’s Minister of Finance

In tandem, Indonesia’s Government has been developing a blue economy strategy aimed at improving the management of its marine and coastal ecosystems, creating equal economic opportunities and promoting sustainable livelihoods. Blue Bonds are a crucial means of financing conservation and sustainable management of ocean and coastal resources. This Blue Bond and potential future issuances can help to bridge Indonesia’s financing gap for the SDGs, which is estimated to reach US$1 trillion by 2030. 

“Indonesia’s blue bond issuance demonstrates the country’s innovative commitment to achieve the SDGs by 2030. Under the leadership of the UN Resident Coordinator, Valerie Julliand, the joint programme builds upon the successful implementation of innovative financing mechanisms that benefit both the environment and local communities. Mobilizing over $8 billion, the SDG Bonds and Green Sukuks are unlocking incredible opportunities to finance projects that contribute to the SDGs.” said Lisa Kurbiel, Head of the Joint SDG Fund Secretariat, United Nations.

Moreover, Blue Bonds contribute to the Archipelagic and Island States (AIS) Forum objectives. Established in 2018, the AIS Forum serves as a platform for development cooperation for archipelagic and small-island states. The success of the Indonesian Blue Bond in international markets can be a blueprint for other Forum member countries to finance their ocean agendas.

Indonesia’s inaugural Blue Bond was issued in line with the Republic of Indonesia SDG Government Securities Framework, developed in 2021 by the Ministry of Finance in collaboration with other government ministries, and with assistance from UNDP, HSBC Bank and Credit Agricole. Integrating Green, Social and Blue sustainability objectives, the Framework enables the issuance of a range of thematic bonds along with Sukuk bonds (Islamic finance bonds compliant with Sharia Law).  

Similar to the Green Sukuk, the Blue Bond benefitted from Climate Budget Tagging, a tool for tracking public expenditure on climate change mitigation and adaptation, implemented with UNDP’s support.

This bond complements the country’s previously issued Green Sukuk and SDG Bonds. Similar to the Green Sukuk, the Blue Bond benefitted from Climate Budget Tagging, a tool for tracking public expenditure on climate change mitigation and adaptation, implemented with UNDP’s support.

“Indonesia now ranks among a number of pioneering countries that are not waiting for the global financial landscape to change – they are re-writing the rules themselves. The issuance of Indonesia’s groundbreaking Sovereign Blue Bond has raised some $150 million that will go directly towards the country’s blue economy, protecting its world-famous ecosystems and biodiversity.  said Achim Steiner, UNDP’s Administrator.

The original version of this story was published by the Joint SDG Fund. To learn more about the work of the UN in Indonesia visit Indonesia.un.org