Green Sukuk: Sustainable Financing Instruments for Infrastructure Development in Indonesia
Dr. Lastuti Abubakar, Dr. Tri Handayani
Universitas Padjadjaran (UNPAD)
Abstract
Sustainable development goals open opportunities for the issuance of Sukuk as an alternative sustainable financing instrument for infrastructure development in Indonesia. In line with the increased awareness to implemented the concept of sustainable development, a new investor market has emerged. The investor will only invest in investment instruments that are categorized as "green". Indonesia develops Green Sukuk to support the green infrastructure development that is based on the World Bank-s green bond model. Based on regulation, there are two main principles regarding the issuance of Green Sukuk: Sharia principles and policies as stated in the roadmap for sustainable finance in Indonesia also POJK No. 51/POJK.03/2017 regarding the Implementation of Sustainable Finance. Some potential projects that can be categorized as ‘green infrastructure- in Indonesia include power plants with renewable energy such as wind power, solar and geothermal energy, as well as mass transportations in big cities. Nowadays, Indonesia is a pioneer of the Green Bond issuance in the Southeast Asia region through the issuance of Green Sukuk. That amount to aproximately USD1.25 billion on March 2018. To optimize the Green Sukuk and create a global market, Indonesia is facing the challenges such as the stakeholders of the Ministry of Finance–as a Green Sukuk issuer–have not yet widely known Green Sukuk; steps to ensure that the project meets the criteria for green infrastructure, and regulations that support the issuance of Green Sukuk as well as the implementation of green infrastructure projects. Therefore, future initiatives are needed to make a Green Sukuk as an alternative financing and investment for green infrastructure development. By a means of green infrastructure development as a driver of a sustainable economy, Indonesia has become part of the countries striving to achieve sustainable development goals.
Keywords: Green Sukuk - green infrastructure - sustainable economic development.
Topic: Law