Environmental Finance's Sustainable Debt Awards 2024

Green bond of the year - sovereign; Award for innovation - bond structure (green bond): Republic of Indonesia

On 19 May 2023, the Republic of Indonesia successfully priced their Samurai bond issuance comprised of two tranches of conventional bonds and another two tranches (seven-year and 10-year) of debut blue bonds totalling JPY104.8 billion ($694 million), with a 1.20% and 1.43% coupon rate respectively. The blue bonds portion represents JPY20.7 billion.

The bonds mark both Indonesia's first blue bond and the first blue bond offering in the 'Samurai' market. It also marks the first publicly offered sovereign blue bond issuance that is in accordance with International Capital Market Association (ICMA) guidance.

The transaction received strong investor interest, with the investors represented by life insurance companies (28%), city banks (11%), asset managers (11%), central cooperatives (5%), public funds (7%), regionals (17%) and overseas investors (19%).

Also winning the award for Award for innovation – bond structure (green bond), the joint book runner on the deal MUFG said the structure was designed to attract greater demand from new pockets of ESG-focused investors via longer tenor tranches.

The proceeds from this bond issuance will provide a much-needed boost to Indonesia's blue economy, including coastal protection, sustainable management of fisheries and aquaculture, marine biodiversity conservation and mangrove rehabilitation, according to the United Nations Development Programme (UNDP).

In addition, Indonesia's government has been developing a blue economy strategy aimed at improving the management of its marine and coastal ecosystems, creating equal economic opportunities and promoting sustainable livelihoods.

The blue bond was aligned with the country's Sustainable Development Goals Government Securities Framework established in 2021 and complements the country's previously issued green sukuk and SDG bonds. Similar to the green sukuk, the blue bond benefitted from Climate Budget Tagging, a tool for tracking public expenditure on climate change mitigation and adaptation, implemented with UNDP's support.

Deal highlights

Issuer: Republic of Indonesia
Size: JPY20.7 billion
Maturity: 24 May 2030 and 26 May 2033
Coupon: 1.20% and 1.43%
Use of proceeds: Energy efficiency, pollution prevention and control, renewable energy, sustainable management of living natural resources
External reviewer: CICERO
Lead managers: Daiwa Securities Group, Mitsubishi UFJ, Morgan Stanley Securities, Mizuho Securities, SMBC Nikko
Credit rating: Moody's (Baa2), S&P Global (BBB), Fitch (BBB)