The Development of Blue Sukuk and Blended Blue Finance
By developing and launching different blue finance measures, Indonesia intends to help create a system for sustainable ocean finance.
An example of this is the Blue Sukuk initiative which will be launched to support investment in a healthy ocean and blue economy.
In 2021, a Sustainable Development Goals Government Security Framework (SDGs Framework) was developed, allowing for the issuance of ‘green and SDGs securities’. These so-called securities were made up of ‘green securities’, a combination of green, blue and sukuk bonds, and ‘SDGs securities’, a combination of sustainability and sukuk bonds. The Sustainable Blue Financing programme was implemented through the Indonesia Climate Change Trust Fund.
Furthermore, to promote sustainable ocean finance, between 2020 and 2021 Indonesia produced a Blue Finance Policy Paper, a Blue Finance Advisory Panel, and a Blue Finance Roadmap.
The initiatives enable the funding of projects that will deliver environmental and social benefits to help the nation achieve its 2030 development agenda.
Indonesia has engaged with the United Nations Development Programme (UNDP) in developing the framework to ensure alignment with the objectives of the SDGs.
Using a blended blue finance model enables easier transactions and investments within and concerning the ocean economy sector.
One of the main challenges with implementing sustainable blue finance is that it is traditionally viewed as having a ‘contradictory nature’—emphasising efficiency and encouraging investment in and development of fisheries, while maintaining and promoting a sustainable environment (meaning that resources are used at a rate at which they can naturally recover). This poses a challenge as investments usually emphasise growth, and traditional sustainability practices do not.
A challenge related to the development of blue sukuk is the limited amount of research available regarding its viability. As it is a new concept, the extent to which accurate future outcomes can be predicted is limited.
Recipe for Successful Implementation
For the blue sukuk bonds to be successful, they require trust from investors—without it no one would be likely to invest in the first place.
Implementation requires large-scale participation which is possible in a country like Indonesia which is the world’s second-largest sukuk-issuing country.