Green Sukuk Towards Sustainable Development In Indonesia
L Hapsari, Y Izharivan, A Erlando, and A.P Darmawan
Durham University
Airlangga University
Abstract
A movement to redeem unfriendly economics and business practices have been exercised in different part of the world in the light of tackling global climate change issue and turning such practices sustainable oriented. In finance, such initiative has been expanded in public financing practices whereby new products were introduces in line with sustainability focus. One of the highlighted sustainable driven product is environmentally-friendly public financing product. As one of the largest forestry and highly potential of renewable energy country, the involvement of Indonesia in Sustainable Development Goals (SDGs) could have significant impact in climate change resilient. On the stage of shifting paradigm into sustainability, the current authorized body is assessing diversified sharia-based financing in the Sustainable Finance Roadmap called Green Sukuk. Green Sukuk itself is a subset of Sukuk that finances green assets. In case of Indonesia, it is a potential instrument for financing targeted project on National Energy Plan which requires new renewable energy up to 23% in the national energy mix in upcoming 2025. In general, ethical-based product was induced with the expectation to be not only ethical, which is in this case being environmentally aware, but also being commercially viable and attractive. The latest 5 years oversubscribed experience of retail sukuk in Indonesia is also mainly emphasizing the potential market of sharia-based financial instruments. However, structuring green sukuk would also add more layers in screening criteria as consideration for the investors. This paper aims to identify and map the possibility of Green Sukuk issuance in Indonesia as well as examine potential individual investor-s perspective towards preference in investing in sukuk, what is happening, what are the contributing factors, and to propose the structure to address it. This also includes 109 upper-middle class respondents to properly address the market demand perspective.
Keywords: environment, economic development, green sukuk, sustainability.
Topic: Environmental Economics