PT Bank OCBC NISP issued the first green bond by a commercial bank in Indonesia, delivering a new source of green financing to fight climate change. This was made possible after the International Finance Corporation (IFC), a member of the World Bank Group, has committed US$150 million to invest in the bank offering.
The pioneering green bond, announced on August 1, has a maturity of five-years and will enable Bank OCBC NISP to finance climate-smart projects supporting the priority of the Indonesian government in achieving a sustainable economic growth. It will also contribute to the government’s target of reducing by 29% the greenhouse gas emissions by 2030.
IFC CEO Philippe Le Houerou describes the offering as a major milestone for the Indonesian banking sector as it is expected to serve as a catalyst in the development of the green bond market in Indonesia.
“In a country where green financing is relatively low, this first ever green bond by a commercial bank marks the first step in unlocking the potential of the green bond market in Indonesia to spur new financing for climate-smart projects,” he says. “IFC is in discussion with the other players and it is keen to provide investment and advisory support to help develop green financing in the country.”
IFC estimates the potential opportunities in Indonesia for green financing are around US$274 billion to 2030.
IFC will also support Bank OCBC NISP with advisory work on green financing, including diversifying and reporting green assets. Proceeds from the green bond will be used to finance climate-related projects in accordance with the Green Bond Principles.
IFC’s investment in the first green bond issuance by a commercial bank in Indonesia follows similar inaugural offerings in other countries, such as in Thailand for TMB Bank amounting to US$60 million in June this year and in the Philippines for BDO Unibank amounting to US$150 million in December 2017. In collaboration with the World Bank, IFC has also worked to build up the capacity of the public and private sectors in green financing. The World Bank likewise supported the Indonesian government’s issuance in February this year of the first sovereign green sukuk by any government amounting to US$1.25 billion.
The IFC investment in Bank OCBC NISP green bond will also help create a new asset class to channel long-term finance to combat climate change. The World Bank Group estimates that by the end of this century, climate change could cost Indonesia between 2.5% and 7% of GDP.
Source The Asset