Innovative Finance for Environmental and Climate Priorities - Resident Coordinator's Remarks, Gita Sabharwal

Bapak Sceneider, Deputy Minister for Development Funding Bappenas,

Ibu Agustin, Director of Multilateral Foreign Funding Bappenas,

Representatives from Ministry of Foreign Affairs and Line Ministries,

Private sectors partners,

Selamat Pagi.

It is a pleasure to join Bapak Sceneider in welcoming you to this critical dialogue in the lead-up to the Financing for Development Forum in Spain next summer.

Let me commend Bappenas for championing innovative financing and today is an opportunity to focus on models that can be scaled up in support of climate action and SDG acceleration. 

As a leader in this field, Indonesia is in a unique position to influence other Member States towards bridging SDG financing gaps by mobilizing additional financing from domestic and international markets.   

Today we are building on national priorities the government of Indonesia has laid out at COP 29 in Baku.

A pillar of these is an emerging domestic carbon market with 577 million tons of equivalent carbon credits in the first tranche. 

Going forward, this carbon market will be a considerable source of funding for climate action. 

Let me speak to four additional scalable climate financing models which can contribute to bridging the $522 billion needed for the NDCs. 

First, the Ministry of Finance, together with the UN, has supported the issuance of blue sovereign bonds to unlock $459 million from domestic and foreign international markets. 

The proceeds enable the government to scale up financing for sustainable fisheries, aquaculture and the rehabilitation of mangrove forests. 

The Ministry is also building the capacities of provincial officials to issue municipal bonds based on robust financial assessments. This has the potential to unlock another $2 billion for social and climate financing.

In addition, private sector entities are seeking support to develop thematic bonds to mobilize financing for affordable green housing and energy, which can contribute greatly towards low-carbon lifestyles. 

Second, five national banks have adopted the Principles for Responsible Banking to develop sustainable financing plans to scale up ESG investments.

Every percentage point increase in ESG investments by these banks will translate into unlocking $1.23 billion for green growth.

One of these banks is scaling up lending for affordable green housing in line with a national priority to bridge the housing gap.

Third, the BAPPENAS is leveraging its convening power in partnership with the UN and Sustainable Energy for All to enable international financial institutions to meet their ESG investment ambitions. 

This will take the form of financing bankable renewable energy projects catalyzing progress towards the government’s net-zero target by 2050. 

Fourth, it will be imperative to leverage Islamic financing to turbo-charge the SDGs and climate action.

Green sukuks through the Ministry of Finance has mobilized $8.4 billion over the past six years and are contributing to emission reductions by making urban transportation more sustainable and climate friendly.

Similarly, Zakat and Waqf funds with an asset base of $27 billion can be transformative for Indonesia’s green transition. We will hear more about this during the presentations. 

I believe highlighting the transformative potentials of Islamic financing at the Financing for Development Forum will further strengthen Indonesia’s leadership on the global stage through innovative use of green sukuks, zakat and waqf funds for climate action and the SDGs.

Importantly, however, while these 4 models are applicable to Indonesia, not all of them translate directly to other country contexts.

Some of the models are better suited for upper-middle-income countries with sufficient fiscal spaces, robust capital markets and a deep private sector.

They also require a mature pipeline of bankable green projects to meet the investment ambition of the domestic and international private sector. 

However, some limitations can be overcome by deepening engagement with young people as they are increasingly championing climate action.

Their preference for ESG products, however small individually, will add up collectively and can make a marked difference over the longer term. 

The UN stands ready to scale up its technical assistance to Indonesia in 3 key ways:

One, by accelerating the issuance of thematic sovereign and corporate bonds alongside impact reporting to track progress against set targets. 

Two, by supporting the adoption of the PRI across national banks to unlock additional ESG financing.

And three, by convening the IFI in support of the energy transformation.

Innovative financing is one of Indonesia’s strengths and the country is also very well placed to spread best practices to other Member States regionally and globally in support of climate action and the SDGs.

I am very much looking forward to the expert insights on this in the upcoming addresses. 

Thank you.