Indonesia is set to introduce securities under the Orange Bond Initiative, the world’s first asset class specifically designed for investments that aim to address gender inequality while being mindful of climate change impacts, by integrating sustainable finance principles in the capital market.
The initiative addresses the United Nations’ Sustainable Development Goal (SDG) 5 on gender equality, which is represented by the color orange, by mobilizing capital to support businesses and organizations that promote economic opportunities for women, especially in micro, small and medium enterprises (MSMEs), and enhancing financial access for women and other marginalized groups.
“There is limited financing support under thematic bonds for the MSME ecosystem, and the introduction of orange bonds aims to bridge these financing gaps and support the community and women-focused MSMEs,” Yanuar Nugroho, coordinator of the SDGs expert team at the National Development Planning Ministry (Bappenas), told a media briefing on Wednesday.
The country needed Rp 24 quadrillion (US$1.48 trillion) to close the gap in the financial sector to achieve its SDG targets, Yanuar continued, and the new bonds could address part of that financial need.
“Bappenas supports the orange bonds. They are expected to play a crucial role in addressing the gaps by providing capital for projects focused on sustainability and gender equality,” he said.
Angela Ng, COO of Impact Investment Exchange (IIX), said orange bonds could mobilize around $10 billion and potentially empower up to 100 million women and gender minorities by 2030.
“Orange bonds are not intended to replace green bonds, but rather will complement them to achieve the SDGs,” Ng said at the same briefing, adding that government collaboration was necessary for private banks to serve as placement agents and for IIX to issue its own bonds.
The private sector is to take the lead in issuing orange bonds, which is initiated by IIX and the Ford Foundation with the support of Bappenas and the Finance Ministry.
Ng did not provide an issuance date for the new financial instrument, explaining that the initiative was still in the introductory phase.
“Our aspiration is to partner with the private sector by 2025 to mobilize for inclusion. But this needs to be collective and we won’t force it. It depends on readiness,” she said.
Chandra A. S. Wibowo, subdirector of market development and deepening at the Finance Ministry, said the government supported the plan to issue orange bonds in the private market.
The government has issued a variety of thematic bonds in recent years, including green bonds in 2020, SDG bonds in 2021 and most recently, blue bonds in 2023.
Recognizing the focus on sustainability in sovereign bonds, the government was now encouraging the Orange Bond Initiative led by the private sector, Chandra said, since the government’s SDG bonds already covered gender equality.
“We haven’t assessed investor interest in orange bonds, but the green bond and blue bond initiatives are quite successful,” he said, suggesting strong market interest in thematic bonds.
According to the Asian Development Bank, a blue bond “is a relatively new form of a thematic bond where the issuer will use the capital raised to support investments in healthy oceans and blue economies aligned with SDG 14”.