IFC invests in Bank OCBC NISP gender and green bonds
Investment aims to reduced gender inequalities and help Indonesia reach greenhouse gas emission targets
The International Finance Corporation (IFC), a member of the World Bank Group, on March 8 announced that it has invested up to 2.75 trillion rupiah (US$200 million) in privately-placed gender and green bonds issued by Bank OCBC NISP of Indonesia as part of the bank’s sustainability bond programme.
The proceeds from the gender bond will enable the bank to increase lending to women entrepreneurs and women-owned small and medium-sized enterprises (WSMEs). This is the first-ever gender bond in Indonesia and follows the gender bond issuance by Bank of Ayudhya (BAY) of Thailand in 2019, which was also supported by IFC. German development finance institution DEG and IFC have agreed to subscribe as anchor investors for a combined amount of up to US$220 million in the gender bond offering by BAY – the proceeds of which will be used to boost lending to WSMEs in Thailand.
The green bond, on the other hand, will support Bank OCBC NISP to expand its green financing programme, particularly in the development of green projects and financing of green mortgages. The green bond is also supported by IFC, following a successful first project in 2018, which has been fully deployed. Bank OCBC NISP announced on August 1 2018 its pioneering green bond, which was made possible after the IFC committed US$150 million to invest in the offering.
As part of the latest project, IFC will partner with Bank OCBC NISP to provide training to the bank’s staff as well as to Indonesian property developers on green buildings. The bank will also work with IFC to develop a targeted approach to support the growth of women entrepreneurs. In addition to demonstrating the visibility of WSMEs as a distinct client segment, the project aims to support the government’s efforts to establish climate finance as a distinct asset class.
WSMEs play a central role in the nation’s economy, with women owning 34% of medium-sized enterprises and 50% of small businesses. Yet, according to IFC’s MSME financing gap study in 2017, Indonesian WSMEs face a financing gap amounting to US$60 billion. About 40% of WSMEs in the country are financially constrained, and 17% of women-owned companies perceive financing as a major growth constraint.
“Increasing women’s participation in Indonesian economy and reducing the gender gap are part of IFC’s core strategy in Indonesia,” says Leste Azam Khan, IFC country manager for Indonesia, Malaysia and Timor.
Bank OCBC NISP president-director Parwati Surjaudaja says the IFC investment will help the bank continue its efforts to provide financing for green projects aimed at reducing the climate change footprint in Indonesia, as well as empower women to build sustainable businesses. “This initiative is one of our efforts to move business process towards sustainable development and ensure a better future for the next generation,” she adds.
Following decades of rapid carbon–intensive growth, IFC notes that Indonesia is vulnerable to impacts of climate change. Green financing is, therefore, critical to helping Indonesia meet its greenhouse gas emission reduction targets – 29% by 2030. In this context, IFC estimates that Indonesia’s green financing opportunities could amount to as much US$274 billion between 2016 and 2020.
The Bank OCBC NISP gender bond is supported by the Women Entrepreneurs Finance Initiative (We-Fi) programme and is aligned with the government of Indonesia’s development goals to reduce gender-related inequalities in the country.
The green bond, which has green building as one of the key priority segments, is supported by the UK government’s Market Accelerator Green Construction Programme, whose aim is to promote market shifts towards green construction and support the development of green mortgages. This initiative is also in line with the recent policy initiatives for green mortgages issued by Bank Indonesia.
In 2014, IFC and Indonesia’s Financial Services Authority (OJK) co-operated to improve regulatory frameworks leading to the issuance of OJK regulation (POJK 51/2017) on sustainable finance for financial institutions. The objective of the regulation is to transition the country’s financial sector towards more sustainable practices.
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