Indonesia

Challenge

By 2100, climate change is expected to result in up to a 7% drop in Indonesia’s GDP, yet 38% of the country’s Nationally Determined Contributions (NDC) to the Paris Agreement remain underfunded. Indonesia requires around USD 20.6 billion annually to implement climate action by 2030. If funding gaps are not addressed, Indonesians will experience direct negative impacts from climate change. These negative impacts will directly harm Indonesia's most vulnerable populations and particularly women. Market failures and the lack of enabling environment are impeding public and private investments at scale.

Innovation

The programme will create a new generation of financial products to combat climate change at scale, by transitioning the country towards low impact energy, protecting the environment, and empowering the creation of women led small businesses and a new generation of impact-driven enterprises. The programme will bring to scale proven and new financing instruments (thematic bonds, impact funds, and SDG-linked loans) and develop the capacities of critical stakeholders. Firstly, the programme will support the expansion of thematic bond issuances and green sukuk to new sectors (e.g. Blue and SDG bonds) and take bond issuances to the subnational level. The programme will collaborate with a network of 14 banks under ISFI to launch SDG-linked loans for SMEs. Secondly, it will support banks as they launch the SDG-linked products, including through the creation of a green/SDG catalogue, which will streamline loan approval systems and provide metrics for measuring impact. Thirdly, the programme will capitalise the growing impact investment ecosystem by operationalising an impact fund in collaboration with Mandiri Capital Indonesia, and the Indonesia APEC Business Advisory Council.

SDG Impact

The innovative financing instruments deployed will contribute to accelerating development in the underfunded sectors, including climate mitigation & adaptation, water & sanitation, and marine resource management, as well as ensuring gender inclusiveness and benefiting vulnerable communities. The targets include 5 SDG-thematic bonds issued, 80 SDG-linked loans disbursed, 1,250 SMEs supported with a prioritization of women-owned and women-led businesses, and 60 impact driven start-ups accessing early-stage financing and 140 graduating from accelerator programmes.

The programme brief description

Indonesia’s Joint Programme proposal aims to ensure that existing social protection systems are more responsive to climate-related and other disasters. This Joint Programme will support the Government of Indonesia which aims to transform existing social protection schemes into an Adaptive Social Protection system. Within 2 years, it is expected to have gathered sufficient evidence of the potential to reduce the exposure and enhance resilience of vulnerable individuals and communities to climate-related and other disasters by providing faster, more predictable, effective and accountable cash and voucher assistance before and/or after a disaster. The Joint Programme advocates for a rights-based, equity and gender-sensitive focus to targeting households and individuals which are already below the poverty line, or which are at risk of sliding below the poverty line, in geographic areas at high risk of climate-related disasters. 

Approach

The Joint Programme is focused on supporting the Government to adopt innovative approaches to Adaptive Social Protection in a middle-income country that is highly prone to climate- related and other disasters. It will take a rights-based, equity and gender-sensitive focus to targeting households and individuals which are already below the poverty line, or which are at risk of sliding below the poverty line, in geographic areas at high risk of climate-related disasters. 

Target groups

Women, children, girls, youth, persons with disabilities, older persons, minorities, indigenous peoples, rural workers.