Green Bonds the Way Forward for Indonesia Environment, UN Conference Hears

JUNE 24, 2015

Jakarta. The United Nations Office for REDD+ Coordination in Indonesia, or UNORCID, has sounded the alarm about the urgency for green investments to mitigate for catastrophic releases of tundra methane into the atmosphere.

Sean Kidney, the chief executive of the Climate Bonds Initiative, which helps to mobilize the international bond market to invest in projects combatting climate change, used his keynote speech at a UNORCID conference in Jakarta to speak at length about the environmental challenges the world faces, particularly in light of “climate tipping points” which could set off more rapid warming.

“Across the Arctic Sea and Siberia, we have vast reserves of frozen methane,” he said at the event, titled “The Role of Climate Finance in Stimulating Green Investment in Indonesia.”

“If that methane were to be released into the atmosphere, it would be a like an injection of adrenaline into the body. We’d have a sudden spike of greenhouse gases. We’d have a sudden increase in temperature. And it would set off other climate tipping points.”

According to Kidney, the window to act is alarmingly small.

“The timespan to address this problem is fairly narrow. Christiana Figueres, the head of the UNFCC” – UN Framework Convention on Climate Change – “says it’s about 18 months,” he said.

And governments by themselves are not doing enough to combat climate change. After almost 20 years of talks with little result, Kidney said, it’s time for a change in perspective.

He said he believed that energizing capital markets, both public and private, to invest in renewable energy and green infrastructure projects would help the global community make the necessary changes.

To that end, Kidney’s Climate Change Initiative works with banks, investors and treasuries around the world to issue green bonds.

“This is a toolkit which has been strikingly ignored to date. It’s the old-fashioned toolkit of using various levers of government to direct private capital to the right kind of infrastructure,” he said.

The approximately $70 billion in green bonds currently on the market may be a drop in the bucket compared to the hundreds of trillions of existing capital, but it’s a number that has grown exponentially from only a few years ago.

While Kidney himself views climate change as a moral issue, he doesn’t ascribe the success of green bonds to environmental idealism.

Instead he emphasized the comparable pricing between green bonds and their competitors, citing the growing risk rating of oil and coal investments in the long term.

“Solar has been exploding in places like Australia, where it’s now price-competitive with everything else. In that case, utilities are getting their lunch eaten. There’s a negative risk factor for utilities which fail to invest in renewables,” he said.

Derom Bangun, a veteran of the palm oil industry and chairman of the Indonesia Palm Oil Board, where he has advocated for sustainable practices for palm oil producers, echoed the need for new ideas in environmental sustainability.

He related Kidney’s message to Indonesia’s massive palm oil industry, which Derom said had taken steps to become more environmentally friendly.

“Indonesia is working hard to show the world that palm oil is sustainable,” he told the conference.

Derom and Kidney agree that Indonesia needed to focus on the environment.

Kidney stressed the importance of a proposed green bond for sustainable housing projects, currently under consideration by the government, as well as the potential of green Islamic bonds, or sukuk.

In the end, Kidney said, the Climate Bond Initiative was about expanding choices.

“We’re about giving options when treasuries have only had companies like Exxon knocking on the door,” he said.