Indonesia raises US$1.25b in first Asian sovereign green bonds sale.
Indonesia will become the first Asian country to sell “green” bonds internationally as it looks to tap into growing investor interest in climate-friendly investments.
Globally, $155.5 billion of so-called green bonds were sold last year, according to the London-based Climate Bonds Initiative. But only a handful of governments have themselves sold such deals, where the proceeds are earmarked for investment in environmentally friendly projects.
Indonesia on Thursday launched a five-year green Sukuk bond – which means the deal will conform to Islamic finance norms as well. While no exact target for the amount it expects to raise has been set, termsheets seen by Reuters suggest at least $300 million.
Last year the Southeast Asian country was upgraded to investment grade by Standard & Poor’s, giving Indonesia investment grade ratings from all three major agencies that will improve its chances of borrowing more cheaply in international markets.
However, the green deal launches as global markets are being whipsawed by investors weighing positive economic growth prospects against worries about looming U.S. interest rate rises.
Indonesia is marketing a 10-year sukuk bond at the same time as the green deal. Initial price guidance sent to investors suggests the five-year green bonds would carry a coupon of 4.05 percent and the 10-year notes, 4.70 percent.
Global green bond issuance hit a record for the fifth consecutive year in 2017. Bankers expect further growth in the market this year as investor demand begins on occasion to produce so-called “greeniums” where green bonds can be sold at a premium – lowering borrowing costs – to regular bonds.
In Asia, Chinese and Indian companies have increasingly turned to the green market to finance environmentally friendly projects but governments had until now stayed away. Worldwide, countries to have sold sizeable amounts of green bonds include Poland – the first-ever – and France.
Indonesia has not said exactly what it will use the proceeds of its sale for. In January, Finance Minister Sri Mulyani Indrawati told Reuters that her team had had good feedback from investors in initial conversations about the deal.
CIMB, Citigroup, Dubai Islamic Bank PJSC , HSBC and Abu Dhabi Islamic Bank are book-runners on the deal.