IFC’s Landmark Investment to Ramp Up Sustainable Finance in Indonesia, Boost Resilience

As part of the financing package, at least 40 percent proceeds will be directed towards green loans to support renewable energy, energy efficiency and green transport projects. This is expected to reduce up to 86,703 tons of CO2 emissions annually by 2028.

Additionally, 15 percent proceed will be allocated to the blue component to fund projects in marine or water resources-related industries, while 20 percent proceeds will be set aside for the social component, providing critical support to thousands of micro, small, and medium enterprises (MSMEs) over the next five years. The remaining 25 percent will be assigned to any of the three segments.

As one of the world's largest archipelagos, Indonesia is especially vulnerable to sea-level rise. To manage climate risk, the nation has ambitiously pledged to reduce its greenhouse-gas emissions by 2030 by 32 percent (with domestic resources) and up to 41 percent (with international support) compared with the business-as-usual scenario.

Against this backdrop, climate and MSME financing are two key drivers for Indonesia's sustainable growth path. But both require significant investment. While IFC estimates a $274 billion climate investment potential for the country between 2016 and 2030, the MSME financing gap is estimated to be $234 billion.

The investment will follow IFC's Guidelines for Blue Finance. IFC's support will also help BSI—a subsidiary of Shinhan Financial Group, the third largest commercial bank in Korea and a leading financial institution in the environment, social, and governance (ESG) space in Asia Pacific—develop its blue finance strategy and green and blue financing framework.

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.