Heaptalk, Jakarta — International Finance Corporation (IFC) poured a USD200 million loan to PT Bank Shinhan Indonesia (BSI) to boost sustainable financing while supporting the nation’s climate goals.
Around 40% of funding is the green loans to support renewable energy, energy efficiency, and green transport projects. This move is expected to reduce up to 86,70 tons of CO2 emissions annually by 2028.
“Expanding climate finance is key to achieving Indonesia’s NZE goal in 2060. The blue economy drives a quarter of the country’s GDP, while small businesses employ 97% of the workforce. This partnership will help further deepen and develop Indonesia’s sustainable finance market and catalyze new investments in key sectors to promote the country’s long-term growth,” said Euan Marshall, IFC’s Country Manager for Indonesia and Timor-Leste.
Additionally, 15% of proceeds will be allocated to the blue component to fund projects in marine or water resources-related industries, while 20% will be set aside for the social component, providing critical support to thousands of MSMEs over the next five years. The remaining 25% will be assigned to any of the three segments.
As one of the world’s largest archipelagoes, Indonesia is especially vulnerable to rising sea levels. To tackle climate risk, the nation has ambitiously pledged to reduce its greenhouse gas emissions by 2030 32% with domestic resources and up to 41% with the business-as-usual scenario.
Against this backdrop, this financial institution perceived climate and MSME financing as critical drivers for Indonesia’s sustainable growth. However, these matters require significant investment. Even though IFC estimates a US274 billion climate investment potential for the country between 2016 and 2030, the MSME financing gap is estimated to reach US$234 billion.
This investment follows IFC’s Guidelines for Blue Finance. IFC’s support will also bolster BSI’s development of its blue finance strategy and green and blue financing framework. As is known, IFC’s current financing package is the latest investment under the Memorandum of Understanding signed between IFC and Shinhan Financial Group in May 2023 to promote ESG investments in emerging markets.
“This new transaction is significant as it lays the foundation for BSI’s long-term growth despite the challenges of raising dollar-denominated funds in Indonesia. We will continue to expand collaborations with IFC to promote sustainable finance,” affirmed President Director of BSI, Hyung Hoe Koo.
