Accelerating Indonesia Sustainable Infrastructure Development through ESG Initiatives in PPP Ecosystem

Abstract

The Government of Indonesia committed to implement the Sustainable Development Goals (SDGs) aim to end poverty, inequality, and mitigate climate change. The submission of an Enhanced Nationally Defined Contribution (ENDC) to UNFCC strengthens Indonesia’s commitment in a low-carbon and climate-resilient economy development. The Minister of Finance has launched an ESG Framework to mainstreaming ESG through government support and facilities on infrastructure financing, in which IIGF (Indonesia Infrastructure Guarantee Fund) has a significant role in providing sovereign guarantee for Public-Private Partnership (PPP). Qualitative approach was used to examine the benefit of ESG and additional value of IIGF’s ESG integrated guarantee to support the acceleration of the Indonesia’s sustainable infrastructure development. This paper concludes that in addition to de-risking instrument, the guarantee will bring additional value in ensuring a fair ESG risk allocation, project structuring and long-term risk management and monitoring. This will allow privates to access green and sustainable financing. The challenges mainly on capacity building and alignment of policy and standards among stakeholders. However, IIGF has opportunity to link with stakeholders and build collaboration to fill gaps and connecting to suitable market. This paper, however, report initial findings of the ongoing comprehensive studies as part of IIGF ESG initiative roadmap.