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Sunday, December 10, 2023

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Indonesia launches new sustainable Sukuk regulations

Indonesia’s Financial Services Authority, or Otoritas Jasa Keuangan (OJK), has issued new regulations for sustainable Sukuk and bonds. OJK Regulation Number 18 follows the launch of the 2023–2027 Indonesian Capital Market Roadmap in January this year.

The guideline will replace OJK’s previous sustainable securities regulations issued in 2017, broadening the scope to also include green, social, Waqf and sustainability-linked issuances.

According to OJK, the new sustainable capital market regulations will seek to mitigate the impacts of climate change in addition to contributing to Indonesia meeting its Paris Agreement commitments.

Indonesia’s sustainable finance efforts date back to 2014 with the launch of the Sustainable Finance Roadmap. Implemented in two phases, the second phase, spanning from 2019 to 2024, seeks to implement policy, products, market infrastructure, coordination among related ministries and non-governmental support into one sustainable finance ecosystem.

The new capital market roadmap launched this year also places considerable emphasis on sustainable finance, with the acceleration of sustainable finance-related programs set as the second of the roadmap’s five pillars.

“Within the next five years, the mission is to create an Indonesian capital market that is deep, liquid, competitive, reliable, growing and sustainable,” Inarno Djajadi, the chief executive of capital market, financial derivatives and carbon exchange supervision at OJK, remarked.

The authority hopes to spur the growth of the sustainable capital market through establishing local green bonds and Sukuk verifiers, carbon trading and the development of ESG-based instruments both Islamic and conventional.

The launch of OJK Regulation Number 18 is part of OJK’s action plan to prepare the legal basis for green Sukuk issuances. This represents the second box the government has ticked off under its new roadmap under the pillar of developing sustainable finance.

The first box was the launch of IDXCarbon, a carbon exchange under the Indonesian Stock Exchange, in late September this year.

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