SEPTEMBER 2022

BLUE FINANCE
INSTRUMENTS GUIDLINE

Ministry of National Development Planning/ National Development Planning Agency (Bappenas)

 INTRODUCTION

Indonesia’s Vision 2045 establishes the country’s maritime culture. Furthermore, actions taken by GoI
development agenda for the next 20 years, targeting a to build a strong maritime are to create strong and
top five economy while sustainably utilizing its natural reliable maritime defense and security capabilities to
resources and addressing poverty alleviation1 2. face local and global challenges.3

As part of Indonesia’s efforts to achieve its 2045 Indonesia has developed a strong commitment to
vision, four pillars have been created and stated successfully implement the SDGs and achieving
that “Sustainable Economic Development” becomes the 2030 Development Agenda. The action plans
the second pillar. This indicates that Indonesia is and roadmap serve as important tools to guide
taken the leadership to become one of the largest all stakeholders on the directions and targets of
economies in the world that driven by investment the Indonesian 2030 agenda and requires strong
and trade; industry, tourism, marine and services; collaboration among stakeholders and commitments
supported by reliable infrastructure and strong--food, in both project implementation and financing.
energy and water--security. Indonesia is pursuing
three strategies toward the global maritime axis: To achieve these goals, Indonesia will need to focus
building a fast maritime economy, a strong maritime on several key strategic sectors to deliver this target,
power, and a strong maritime civilization. one of which is its marine resources sectors and its
marine economy. Indonesia has demonstrated its
In developing a fast maritime economy, Indonesia desire to transition from a marine to a Blue Economy,
will increase its role of the maritime economy to which incorporates a sustainable use of resources for
approximately 12.5% of ​​ GDP by 2045, with a focus enhanced development. 4 However, the Blue Economy
on (1) developing efficient and effective maritime related sectors’ growth is impeded by many blocking
connections, and (2) sustainable and competitive issues, including gaps in regulation, information,
fisheries industrialization, and (3) comprehensive capacity, and, ultimately, finance, 5 6 most of which
marine tourism. In addition, the implementation plan have been identified in the Blue Finance Policy Note,
of the strategy to establish a maritime civilization, a living document prepared by BAPPENAS with the
GoI will establish excellent maritime manpower, support of the World Bank.
innovation in maritime technology, and a strong

Bappenas. 2019. Future Challenges on Indonesia Vision 2045. Retrieved from: [Link]
1

2
The Ministry of Investment. The Blue Economy holds the key to Indonesia’s sustainable prosperity. Retrieved from: [Link]
publication/detail/news/blue-economy-holds-the-key-to-indonesias-sustainable-prosperity
Bappenas. 2019. Future Challenges on Indonesia Vision 2045. Retrieved from: [Link]
3

OECD, Bappenas. 2021. Blue Economy Development Framework for Economic Transformation. Retrieved from: [Link]
4

[Link]/e-library/file_upload/koleksi/dokumenbappenas/file/Blue%20Economy%20Development%20Framework%20for%20Indonesias%20Economic%20
[Link]
Bappenas, 2021. SDGs Government Securities Framework. Retrieved from: [Link]
5

Government%20Securities%20Framework%[Link]
The World Bank. Reforms for a Blue Economy in Indonesia: Oceans for Prosperity, 2021. Retrieved from: [Link]
6

handle/10986/35377

2 Indonesia Blue Finance Policy Note

A robust blue economy policy framework and sources are close to their maximum funding capacity,
coordination strategy is essential to create the new approaches are essential to “crowd-in” financing
necessary enabling environment7 to achieve and enhancing the mobilization, management, and
economic growth while ensuring sustainability. use of blue finance. While closing this gap is critical, it
Fortunately, the overarching policy framework exists is challenging. It will involve addressing the enabling
in Indonesia, through documents such as the RPJP, environment and policies relevant to the sector,
RPJMN and National Ocean Policy. However, greater as well as bringing sufficient financial resources
coordination, specifically around the numerous to address Blue Economy financial needs in a
blue finance strategies, investments in innovative strategic manner, as has been captured in a range of
sectors such as blue carbon and various pilots remain publications and reports, including the Blue Finance
necessary across sectors and levels of government. Policy Note and the Blue Finance Strategic Document
Given the challenges to blue finance around natural developed by CMMAI.
resources management, business readiness, investor
environmental and social standards, coordination of Key to the work plan will be identifying key
actors, infrastructure, finance delivery mechanisms, government institutions that can lead the process and
and data and transparency, there is a need for a enable blue financing at scale in collaboration with
workplan that can coordinate actors, build consensus, key stakeholders. Coordination between BAPPENAS,
and identify and prioritize specific actions to be taken. MoF, CMMAI and MMAF is a necessity. Learning from
the current implementation of the KLHK and BPDLH
A key barrier to unlocking the marine potential of is also important, among other lessons from existing
Indonesia is addressing the financing gap in the institutions involved in blended (public and private)
sector. As current public and philanthropic financing and socially responsible financing.

IFC. (2022). Guidelines for Blue Finance. Retrieved from [Link]

7

[Link]?MOD=AJPERES&CVID=nWxsyxN

Indonesia Blue Finance Policy Note 3

 ENABLING ENVIRONMENT
AND POLICIES

Under the guidance of the proposed Blue Finance Advisory Committee as a coordinating body, and
building on the extensive SDG Government Securities Framework and Sukuk models, the following next
steps are proposed:

Coordination of a National Blue Tagging for national Public Expenditure

Blue Finance Framework – budgets – Once relevant sectors are Review & Repurposing
this is a priority to establish agreed, a crucial next step for GoI Government Spending –
and agree eligible use of funds is Budget Tagging. Budget tagging using the Public Expenditure
(see appendix 1 for a sample). is an integral component of GoI’s Review (PER) Guidelines
There are currently competing planning and budgeting process provided by the World
definitions of the blue financing to identify and quantify capital Bank, the identification
framework, (e.g. the OECD requirement for thematic financing of recommendations and
Blue Economy Development instruments. It is an integrated draft regulations to address
Framework; IFC Blue Finance process by projects to identify and public expenditure (including
Framework), with a need to sort planned expenditures based on government fiscal transfers)
resolve these differences expected impacts (environmental, and incentivize sustainable
under the SDG Government social and economic) conducted by business practices in the
Securities Framework. The Blue the appropriate line ministry and priority sectors will need to
Finance Advisory Committee validated by BAPPENAS. BAPPENAS be addressed.
will need to rapidly address and MoF are subsequently
this framework to ensure a responsible for reviewing and
consistent approach across approving projects, budget
ministries, leveraging resources allocations and subsidies to be
from UNDP, ADB and others. included in national budgets. As such,
the GoI tagging process is designed to
identify expenditure of projects that
deliver benefits in accordance with
GoI’s agreed financing framework
(SDG Financing Framework) involving
at least 22 line ministries8. This is a
priority activity to be conducted once
eligibility issues are addressed.

8
Republic of Indonesia, SDG Government Securities Framework, 2021

4 Indonesia Blue Finance Policy Note

Blue Carbon - There is Monitoring and Reporting Capacity Building –
considerable interest in Framework – While the Human resource capacity
leveraging blue carbon (as SDG Government Securities at all level of coordinating
a potential payment for Framework includes a ministries are essential to
ecosystem service model) Monitoring and Reporting the success of Blue Finance
from MPA’s to support Framework, this framework still implementation. Building
MPA operating and capital lacks adequate “blue economy” the capacity through
investments. However, metrics. At the same time, training for mid-level
the policy consideration the sukuk instruments do not managers and officials can
in relation to the national have blue economy metrics. be applied to member of
strategy and Nationally BAPPENAS, in tandem with key ministries. The role
Defined Contributions, MoF and related partners, of MoF will be essential to
including but not limited to will develop a blue finance provide such capacity.
implementing regulations monitoring and reporting
related to carbon pricing system based on the SDG
so that MMAF can realize Government Securities
carbon revenues need to be Framework and associated blue
addressed. This will require tagging to ensure investment
coordination between impacts are robustly tracked.
CMMAI, MOEF, MMAF and
others.

Indonesia Blue Finance Policy Note 5

 RAISING FINANCIAL
RESOURCES

Critical to the evolution of the blue economy is the raising of sufficient financial resources to address Blue
Economy financial needs in a strategic manner. While there are several tools and mechanisms that may
be considered (see appendix 2), the utility of the tools is driven in large part by addressing the following
consideration across multiple ministries as part of the “Blue Finance Discovery Process” (Appendix 3):

Eligible Use of Funds – as Amount (and Type) of Channelling modalities

noted above, eligible uses Capital Required – based on – the agencies and entities
of capital will determine the prior eligibility criteria, an responsible for providing
the types of financing enumeration of the projects fiduciary management of the
instruments to be utilized. and investments should result funds based on the above will
Considerations include in the identification of the need to be addressed with
capital vs operating costs; amount of capital required MoF as part of the strategy
short term vs long term as by uses and types. This would development process,
well as associated revenue inform whether uses are capital including addressing concerns
generating and repayment investment vs operating costs, related to “ringfencing”
mechanisms. Addressing as well as demand for grant vs dedicated resources.
eligible investments (see equity or debt investments. Fortunately, Indonesia
Appendix 1 for a sample) benefits from significant
in the context of guidance investments in robust
from IFC, AFD, OECD and the channelling mechanisms for
SDG Government Securities environmental finance, which
framework will result in a need to be engaged to benefit
suite of potential investments the blue economy. Examples
spanning the priority include BPDLH as an asset
demands and addressing the manager on behalf of GoI. This
long-term threats to marine is particularly relevant if funds
natural resources. are to include solutions that
fall under the responsibility of
different line ministries (e.g.,
Tourism).

6 Indonesia Blue Finance Policy Note

MoF Approval – the Instrument Characteristics Identify and approach
design criteria, terms, – based on the above transaction partners
and conditions for MoF and MoF design criteria, and investors – based
approval for any sovereign appropriate instruments will on the above, together
instruments (SBSN Sukuk have been identified (Bond; with the proposed term
or SDG Bond under the SBSN Sukuk etc); ideally, sheet(s) agreed by the
SDG Government Securities respective term sheets principal agencies in MoF
Framework) will need to be summarizing key attributes SDG Secretariat; Sukuk),
addressed throughout the should be developed. would enable potential
process. Parameters related transaction partners (e.g.,
to timing, term, amounts external reviewers, lawyers,
and conditions should all be banks, and investors) to be
met based on MoF guidance. approached.

REVENUES

As shared in the Blue Finance Policy Note, it is These range from user fees, levies and penalties to
important to separate revenue options from payments for ecosystem services (such as Carbon
financing instruments. Non-tax revenues are a payments) and biodiversity offsets. Each of the
critical component of any sovereign or non-sovereign sectors (tourism, fisheries, aquaculture etc.) benefiting
financing instrument, particularly in the post-covid from healthy ocean ecosystems can be considered to
environment. A number of revenue options are contribute additional non-tax revenue options9.
available to support the development of the blue
economy in Indonesia, but require further policy A priority will be to develop policy recommendations
development and implementation capacity in order to realize scalable non-tax revenue options from a
to effectively scale and raise required amounts. range of sectors, including blue carbon and tourism.

9
Bohorquez, J. (2022). A New Tool to Evaluate, Improve, and Sustain Marine Protected Area Financing Built on a Comprehensive Review of Finance
Sources and Instruments. Frontiers in Marine Science. Retrieved from [Link]

Indonesia Blue Finance Policy Note 7

 LESSONS FROM THE GREEN
BOND MARKETS

Indonesia is fortunate in that it has established a robust “green” strategy, upon which Blue Finance can build.
Despite the relatively innovative nature of blue finance and the documented barriers, the green finance market
offers lessons which, if applied, would facilitate the development of the blue finance market10, providing
regulators (such as OJK) with necessary assurances. In addition, the green finance market provides lessons
learned which can be applied to the blue bond market.

Table 1: Blue Bond Gaps and Mitigation Solutions11

Gaps & Barriers Solutions

Base blue bond eligible projects on Green Bond

Lack of guidance on blue bonds
Principles

Lack of projects Provide feasibility support

Lack of Corporates adhering to blue standards Explain benefits

Projects are too small Bundle projects; Scale projects with other capital

De-risk through multiple revenue streams

Projects are too risky
De-risk through credit enhancements or insurance

Projects are too complex Clarify project structures

Low issuer credit rating Add MDB guarantor

Lack of buyers Focus on impact investors familiar with the space

Lack of awareness of benefits Provide technical assistance

Lack of credibility Develop metrics, principles, verification mechanisms

High transaction costs Standardize assessments; develop transaction tools

10
Roth, N. (2022). Blue Bonds: Financing resilience of coastal ecosystems. Retrieved from [Link]
uploads/2019/05/Blue-Bonds_final.pdf?msclkid=7b338c26c4cf11ec846caaf793a6e114
11
ibid

8 Indonesia Blue Finance Policy Note

Key lessons identified include:

• Buyers of green bonds remain a sub-set of • Definitions matter, but they do not have to be
the overall market too narrow

• Emerging markets are an important source of • Guidelines, transparency and accountability

green bonds, with China leading the market are critical

• Multilateral Development Banks are key • Reporting requirements on use of proceeds

partners in the development process, and impact are critical to credibility
providing credentials, risk mitigation and • Institutional investors take time to cultivate
technical assistance and are a risk averse, but important audience
for scale

Key challenges associated with attracting capital to sustainable marine and coastal investments include i) lack
of track record of transactions (in comparison with terrestrial ecosystem investments); ii) lack of measurable
and tradeable assets with strong monitoring, especially for nature-based investments (e.g., blue carbon); and
iii) lack of reliable data related to fisheries, coral reefs, and marine ecosystems services12.

RECOMMENDED INSTRUMENTS

Based on the review undertaken for the Blue Finance While an increasing number of instruments are being
Policy Note, several financial instruments have been tested in marine ecosystems, Indonesia has not yet
tested and piloted in Indonesia, primarily in terrestrial tested a blue bond (based on the SDG Government
ecosystems. Unfortunately, many of these efforts are Securities Framework) or blue sukuk, despite having
not coordinated, do not effectively link to revenues successfully launched green versions of these
and few have been tested in marine ecosystems. All instruments. The table below provides a summary of
would benefit from policy and enabling environment instruments and recommended next steps. Further
interventions identified here to improve their details are available in the Blue Finance Policy Note.
effectiveness and scalability.

Table 2: Summary Table of Financing Instruments and recommended next steps identified in Blue Finance Policy Note

Instrument Tested in Indonesia Next Steps

SDG Bond Yes, but not for Blue Development of Blue SDG Bond

Blue Bond or Sukuk No; but green sukuk has been tested Test feasibility of blue bond / blue sukuk

Environmental Impact Bonds No Test feasibility of carbon credit or PES

based Instrument

Insurance Yes (ADB & GEF; Mercy Corps) Test feasibility of parametric insurance for
(Parametric Coral Reefs and environmental impacts.
Mangrove) Determine barriers to scale

12
Coalition for private investment in conservation. (2021). Conservation Finance. Retrieved from [Link]
[Link]

Indonesia Blue Finance Policy Note 9

 Trust Funds Yes Test scaling marine trust funds via BLU

Blended Finance Facilities Yes – primarily in terrestrial Engage with relevant blended facilities
directly to scale

Impact Investment Yes- esp. aquaculture, technology, fin Define linkages with priority sectors to
tech and plastics scale

Debt for Nature Swap Yes, terrestrial Determine if opportunity arises for marine
related investments

A Blue SDG Bond and / or SBSN sukuk has been for the success of such a facility are not currently in
identified as a potentially viable option, subject to the place. These include a) the presence of an adequately
completion of a formal feasibility assessment and sized and robust pipeline of investment ready
meeting MoF design criteria. A sovereign instrument, projects representing adequate absorptive capacity;
issued with the backing of the GoI is more likely to b) robust impact metrics and monitoring systems; c)
attract investment to this relatively nascent sector at the ability to target relevant investors; d) structural
this time, assuming the enabling environment issues and legal capacity to address issuer, channelling
and the design criteria required by the MoF in are options and legal costs; e) strong implementation
addressed. and operational capacity to minimize transaction
costs and f) strong coordination between private
This determination has been made based on the and public stakeholders. Critically, the pipeline must
intended use funds; the nature of the anticipated be consistent and large enough to cover the high
underlying assets and the lack of a robust financial transaction costs associated with developing blended
pipeline of projects capable of generating adequate finance facilities which can be both time and resource
cashflows. While a blended finance vehicle may be intensive.
viable in due course, the necessary prerequisites

10 Indonesia Blue Finance Policy Note

PROCESS OF BLUE BOND/SUKUK
ISSUANCE

The issuance of a publicly traded bond in the capital The framework can also reflect how the bond/sukuk
markets is a complex process that is subject to is intended to contribute to global sustainability
securities laws and dedicated regulators that are targets such as the SDGs. The framework should
specific to each jurisdiction. Bourses and exchanges describe the issuer’s overall sustainability policies and
also have their own requirements and rules. Issuers strategy. Investors will consider the bond framework
need to imperatively hire appropriate financial and carefully when deciding to invest in a bond/sukuk.
legal advisers to guide them through the process. The framework is typically developed jointly with the
Accordingly, the purpose of this section is to issuer’s advisors including the specialized team of
identify the specificity of the issuance of a use-of- its lead underwriting bank as well as environmental
proceeds instrument such as a blue bond rather consultants when needed.
than summarize overall the various steps of a debt
security transaction. In this, issuers will need to reflect Define and Confirm Project Categories
the voluntary guidance of the principles provided by
ICMA. Eligible blue projects can cover the financing or
refinancing of investments and other related and
Pre-issuance supporting expenditures, as well as physical and
financial assets including bank loan portfolios. Issuers
Create a Sustainable Bond/Sukuk Framework can refer to the non-exhaustive list of eligible project
categories under the GBP. This guide provides
A sustainable bond/sukuk framework is the additional guidance on eligible blue project categories
foundation of sustainable bond/sukuk issuances. in the section below with an illustrative matrix of
The framework is a publicly-disclosed document that indicative eligible projects.
outlines how the issuer will ensure that its blue bond/
sukuk is aligned with the core components of the Obtain an external review
principles, specifically:
The Principles recommend that issuers get an
(i) Use of proceeds; external review of the bond/sukuk framework before
issuance and make it publicly available on their
(ii) Process for project evaluation and website. While there are multiple types of external
selection; reviews, the most common approach is to seek a
second party opinion (SPO) on the bond framework.
(iii) Management of proceeds; and This is generally done by the issuer contracting an
SPO provider. SPOs are important to disclose to both
(iv) Reporting (Allocation and Impact potential investors and other key stakeholders of the
Reporting). company, country, or institution.

Indonesia Blue Finance Policy Note 11

 Post-issuance For impact metrics, there is not a globally accepted
list of impact metrics for sustainable blue economy
Management of Proceeds projects. This is because of the breadth of the sectors
involved in the sustainable blue economy and the
An essential feature of the Principles in relation to relative newness of the market. For climate bonds,
use-of-proceeds bonds is the focus on management for example, many projects can be reported using
and allocation of proceeds. The recommendations a common indicator of tons of greenhouse gas
are quite specific and should be consulted directly emissions avoided. For sustainable blue economy
in the text of the GBP. It is important to note that projects, which span seafood to tourism to marine
market practice has moved increasingly to the simpler protected areas, there are a multitude of indicators to
tracking of “equivalent amounts” of net proceeds measure impact.
rather than the other methods mentioned in the GBP.
It is also important to underline the recommendation The development of appropriate indicators, defined in
for issuers to use an external auditor, or other third the framework, is recommended for now until there is
party, to verify the internal tracking method and the a more globally harmonized set of impact indicators.
allocation of funds from the net proceeds ICMA’s Harmonized Framework for Impact Reporting
currently does not include explicit indicators for
Allocation and Impact Reporting reporting of the impact of “blue bonds”, however,
issuers can still consider the proposed metrics as
The Principles recommend annual reporting of both guidance for their reporting.
allocations to projects and their expected impact.

12 Indonesia Blue Finance Policy Note

PROJECTS CATEGORIZED AS
ELIGIBLE ON BLUE BOND/
SUKUK ISSUANCE

Before contemplating financing through a “blue bond/sukuk”, potential issuers need to identify eligible projects.
The GBP explicitly recognize several broad categories of eligibility for green projects which contribute to five
environmental objectives:

climate change climate change natural resource biodiversity pollution prevention

mitigation adaptation; conservation; conservation; and and control.

These are also highly relevant for the sustainable blue Consult the Ocean Finance Handbook (Friends of
economy. While the eligible project categories under Ocean Action, 2020) for clarity on sustainable blue
the GBP are descriptive rather than prescriptive, economy financing instruments and to identify
issuers are not always clear on how to raise money instances where “blue bonds” are not applicable;
for blue projects under the Principles. This guide aims
to synthesize key documents to create an indicative Exclude from their eligibility criteria projects involving
list of blue projects and eligibility criteria that are any activity that is marked in the Recommended
common across institutions. Exclusions for Financing a Sustainable Blue Economy
list (UNEP FI, 2022e). The activities included therein
Appendix 1 provides an indicative and non-exhaustive cover various ocean-related activities that should
categorization of blue projects that could be eligible not be financed due to their damaging impact on the
for blue use of proceeds under the GBP. For example, ocean, negative impact to other SDG areas and high
decarbonization of a domestic shipping fleet could risk; and Review the Turning the Tide: How to Finance
contribute to the GBP category - clean transportation. a Sustainable Ocean Recovery (UNEP FI, 2021) and
Projects include assets, investments and other Diving Deep: Finance, Ocean Pollution and Coastal
related and supporting expenditures such as R&D Resilience (UNEP FI, 2022a) toolkits for detailed
that may relate to more than one category and/or information on the sustainability and financing
environmental objective. of each sector, as well as for guidance on how to
implement the Sustainable Blue Economy Finance
It is worth noting that while existing blue bonds also Principles (UNEP FI, no date) in the corresponding
include freshwater-related projects, this guidance “blue bond”. Further information on how “blue bond”
is aimed at highlighting to issuers the possibility to categories relate to the environmental categories
finance ocean-related projects. detailed above can be found in the Ocean Finance
Framework (ADB, 2020) and the Guidance for Blue
In addition to the Principles and related ICMA Finance (IFC, 2021). Additionally, the UN Global
guidance, issuers are encouraged to: Compact Sector Specific Practical Guidance can be
referred to for good practices in sustainability.

Indonesia Blue Finance Policy Note 13

 BENEFITS OF BLUE
BOND/SUKUK ISSUANCE

• Sovereigns and sovereign agencies

• Multilateral Development Banks (MDBs) and

Development Finance Institutions
Blue bond/sukuk can be used
• Banks and other financial institutions
to finance the sustainable blue
economy by all types of public • Large and medium-sized companies
and private sector issuers.
These include:

• Help articulate and enhance credibility of its

sustainability strategy;

• Improve diversification of its investor base,

thereby expanding funding sources and potentially
reducing exposure to bond demand fluctuations;

For an issuer, the main • Create opportunities for larger and longer-term
advantages of issuing use- financing;
of-proceeds bonds such
as blue bond/sukuk are • Lead, in some cases, to improved financing costs
typically that they: through excess demand (i.e., A “greenium”); and

• Lead to reputational benefits (e.g., Marketing can

highlight issuer’s environmental credentials and
support for blue investment).

• Increased internal awareness on sustainability issues

and related change in corporate culture;

• Integration of sustainability considerations into

business-decision making;

• Increased interaction/synergies between different

teams on sustainability matters;

As use of proceeds bonds, blue • Adoption of new policies, processes, and it tools to
bonds can also have internal better track sustainable projects and assets; and
benefits for issuers such as:
• Identification and better management of
sustainability risks.

14 Indonesia Blue Finance Policy Note

CONCLUSION

Indonesia benefits from has a robust impact

investment policy environment and market.
The opportunity now exists to build upon
experiences such as the SDG Government
Securities Framework and SBSN Sukuk
experiences to address the significant gap
in “blue financing” to achieve the nations
worth goals. Through a strategic approach
to addressing enabling environment and
policy constraints, coupled with clearly
defining eligible use of funds, quantifying the
opportunities, and developing robust, highly
impactful investments in the sector, Indonesia
will be able to raise the necessary funds from
governments and investors alike.

Intensive cooperation and collaboration of all stakeholders (public, private, charitable and national)
in national, province and region level is one of the keys to successfully developing the blue economy
in Indonesia. Given the rapid development of the Blue Economy, this document is dynamic in nature
and fits the current situation.

Indonesia Blue Finance Policy Note 15

 APPENDIX

16 Indonesia Blue Finance Policy Note

APPENDIX - 1
Potential Eligible Uses of Funds

Several taxonomies related to defining eligible blue investment sectors have been developed in recent years.
These include the Guidelines for Blue Finance by the International Finance Group13, the Asian Development
Bank (ADB) Ocean Finance Framework14 and the United Nations Development Program (UNDP) as part of the
Blue Financing Strategic15 document. Broadly, each of these includes investments in the following16:

Ecosystem and Natural Pollution Control – Sustainable Coastal and Ocean Finance -
Resource Management includes solid waste Marine Development – includes support
- includes ecosystem management, resource includes coastal resilience, for ocean finance
management and efficiency and circular coastal and marine tourism, instruments
restoration, sustainable economies, non- ports and shipping and
fisheries management point source pollution marine renewable Energy
and aquaculture management and waste
water management

Table 3: Indicative Blue Project Categories and Considerations17

Category Definition and Scope Sub-Categories Positive Consideration Exclusions18

Sustainable Projects that improve Fisheries Fisheries Fisheries

Seafood19 the environmental  Fisheries policy,  Selective, low-impact  Species on the
sustainability of management, and gear or fishing activities IUCN Red-list
seafood value chains, compliance  Minimize impact on for Endangered,
including fisheries and  Sustainable fishing surrounding ecosystem Threatened or
aquaculture. practices and operations Protected Species
 Minimize bycatch
This category is closely (includes entire value  Destructive and illegal
 Vessel compliance and
related chain) fishing practices
monitoring
to the GBP’s Aquaculture  Lack of by-catch
 Ghost Gear solutions
environmentally  Sustainable aquaculture measures
sustainable Aquaculture
operations (includes  Lack of compliance
management of living entire value chain)  Nature-based solutions with local, national or
natural resources and  Minimize invasive international laws and
 Aquaculture policy,
land use, and species and escapes regulations
management and
the terrestrial and compliance  Biosecurity systems Aquaculture
aquatic biodiversity
Both  Humane predator  Farm siting illegal
categories.
 Certification schemes control or impacting on key
Both ecological areas
 Traceability and
sustainable marketing  Certification or third-  Use of harmful
party verification chemicals
 Cold chain and storage
for small- and medium-  Traceable seafood
sized fishing in areas products
with sustainable fishing
quotas

13
IFC. (2022). Guidelines for Blue Finance. Retrieved from [Link]
[Link]?MOD=AJPERES&CVID=nWxsyxN
14
The Asian Development Bank. (2019). The ADB Ocean Financing Initiative. Retrieved from [Link]
Financing%[Link]
15
The UNDP. (2020). Blue Financing Strategic Document. Retrieved from [Link]
[Link]
16
The Asian Development Bank. (2019). The ADB Ocean Financing Initiative. Retrieved from [Link]
Oceans%20Financing%[Link]
17
UNEP FI, 2022e.
18
UNEP FI, 2022e.
19
Read more about the seafood, maritime transportation, ports, marine renewable energy and the marine and coastal tourism sectors at UNEP FI, 2021.

Indonesia Blue Finance Policy Note 17

 Category Definition and Scope Sub-Categories Positive Consideration Exclusions18

Sustainable Projects that increase Decarbonization and Green supply chains: Exceeding limit values for
Ports environmental renewable energy renewable energy, waste SOx, NOx
performance and Management of port management, sustainable Non-compliance with
sustainability of pollution sourcing MARPOL, IMO, national
port functions and Nature-based solutions and Green port technologies: regulations and best
infrastructure. conservation objectives in alternative fuel supplies, practice for Solid &
This is closely related port development shipyard capabilities for chemical waste / runoffs
to the GBP’s clean green retrofits, clean from ports into sea
Integration of sustainable
transportation onshore power upgrades. Evidence of
ports into wider sustainable
category. development plans and Spatial management and Oil Spills and Non-
marine spatial plans operational policies in compliance with
place to protect marine MARPOL, IMO, national
species and IUCN red- regulations and best
listed habitats. practice for oil transfer
and management.
Loss of critical IUCN
red-listed habitats
and species in the
development and
implementation of the
port.

Sustainable Projects that Retrofitting vessels for: Renewable energy Fossil Fuels
Maritime involve increasing decarbonization and
Transportation environmental emissions reduction; energy
Green supply chains: Exceeding limit values for
performance and efficiency; improved ballast
renewable energy, waste SOx, NOx
sustainability water management.
management, sustainable
of maritime sourcing
transportation. Ballast water discharge
Commissioning vessels that:
fosters invasive species
This is closely related utilize alternatives to heavy
Green shipping
to the GBP’s clean fuel oil; provide improved
technologies that need
transportation fuel efficiency; leverage Waste disposal harming
funding, from research to
category. alternative technologies marine life
installations
for low-carbon transport;
present significantly lower
Oil Spills harming marine
emissions profiles. Safe and environmentally-
life, human health,
sound offshore platform
coastal tourism
decommissioning
Sustainable vessel
deconstruction and Circular economy designs
recycling (or scrapping).
Offshore platform
installation, operation,
decommissioning, and
transitioning to new
functions in line with the
sustainable blue economy.

Integration of maritime
transportation with wider
sustainable development
plans, e.g. marine spatial
planning and integrated
coastal zone management.

18 Indonesia Blue Finance Policy Note

 Category Definition and Scope Sub-Categories Positive Consideration Exclusions18

Marine Projects that increase Development, Renewable energy Noise pollution

Renewable contribution of operation, maintenance, project that is integrated
Energy marine and offshore and sustainable with wider sustainable
Air pollution including
renewable energy decommissioning of development plan,
greenhouse gas
to energy mix and offshore wind (both fixed including robust marine
emissions
renewable energy and floating installations), spatial plans, avoiding
projects that support wave, tidal, floating solar, areas of high ecological
other sustainable blue ocean thermal energy value and migratory Seabed disturbances and
economy sectors. conversion and a number species routes impacts
of conceptual energy Reduction of bird strikes
generation technologies
This category is closely Lifecycle approach to
related to development
Energy efficiency Minimization of pollution
the GBP’s renewable
energy and energy Global best practices
efficiency categories. Monitoring and data
collection

Sustainable Projects that improve Sustainable coastal and Visitor limits Destination development
Coastal the environmental marine tourism planning Proper siting of within protected areas,
and Marine sustainability of and management developments critical habitat for
Tourism coastal and marine ETP species, or areas
Cruise ships maintaining
tourism. providing vital ecosystem
Sustainable tourism minimum safe distance
This category is closely services such as coastal
infrastructure development from areas of high
related flood defense
Sustainable procurement biodiversity, ecological
to the GBP’s and sourcing value or protected areas
environmentally Ballast water and invasive Air pollution including
sustainable species controls for cruise greenhouse gas
management of living Integration of sustainable emissions
ships
natural resources and tourism within wider
sustainable development Active management
land use category.
plans including marine and conservation of
spatial plans ecosystems and wildlife Water pollution
Active avoidance of areas Wildlife impacts for
of high ecological value entertainment purposes
Waste management
solutions and circular
economy approaches
Noise pollution mitigation

Coastal Projects that support Disaster risk reduction Nature-based solutions Grey infrastructure in
Climate ecological and Protection of natural areas of high ecological
Adaptation and community resilience heritage value
Protection of coastal
Resilience20 and adaptation to Greenhouse gas
development through use Green infrastructure
climate change. emissions
of green infrastructure and Integration of ocean
nature-based solutions health and climate Impacts to ecosystems
Geographic eligibility: adaptation in coastal and wildlife

Development, construction, development plans

Projects must be operation and maintenance Early warning systems for
within 50 km of the of green infrastructure natural hazards
coast or within the projects
marine environment.

Recovery of ecosystem
This category is services for natural
closely related to the infrastructure
GBP’s green buildings
and climate change
Coastal adaptation to
adaptation categories.
climate change

20
Read more about the coastal infrastructure and resilience, and the waste prevention and management sectors at UNEP FI, 2022a

Indonesia Blue Finance Policy Note 19

 APPENDIX - 2
Summary of Blue Finance Potential Instruments
Identified in Indonesia

There are several potential financing options Sovereign Blue Bond, showing the adaptability of
available for healthy marine ecosystems globally using these various funding instruments specifically
and in Indonesia, with some research identifying for the blue economy. Indonesia specifically has
21 financial instruments and 11 or more sources of previously issued green bonds/sukuks and the GoI
finance, and more than 75 potential combinations21. is adapted to the deployment of bonds and blended
Blue finance instruments (distinct from blue finance instruments in general to support sustainable
finance sources) such as trust funds, impact development initiatives.
investments, debt-for-nature swaps, revolving loan
funds, compensation funds, sovereign wealth fund, Indonesia has already established some of the
debt conversion, corporate social responsibility, identified instruments such as Trust Funds and
parametric insurance products, bonds, and blended has attracted significant impact investment. At the
finance all constitute possible financing solutions. In same time, given that the use of funds is intended
addition, there is a growing body of practice seeking to address marine protected areas and coastal
to develop sustainable financing sources such livelihoods, without an effective underlying asset, a
as ecotourism, sustainable fisheries, sustainable limited number of scalable instruments are available.
aquaculture and payments for ecosystem services. Potential scalable options at this time center on
As an example, in 2018, the World Bank supported sovereign blue bonds or blue sukuks which would be
Seychelles for the development of the World’s first issued by the GoI.

Table 4: Summary Table of Blue Finance potential instruments (Blue Finance Policy Note)

Instrument Type Pro Con Examples

Debt Based SDG Bonds, Green Green and SDG instruments Blue instruments yet to be SDG & Green Bond
Bonds have been issued by GoI developed in Indonesia issued by GoI

Banking Sector Sector regulated by OJK; Conservative lending; Multiple bank

facilities available for
OJK developed sustainable Typically unfamiliar with established enterprises
finance principles which guide Blue Economy Sector, with business
lending from banks to MSMEs particularly natural assets fundamentals
and Corporates
See “Blue Finance
Barriers” below

Fin-Tech Rapid opportunity to scale; Model relies on high Aruna

lower transaction costs volumes and low
transaction costs

State Owned Provide bridge between grant Conservative lending; LPMUKP at MMAF
Enterprises and commercial lending;
Typically unfamiliar with PT PNM
Support development of Blue Economy Sector,
“bankability” particularly natural assets

Linked to ministries and See “Blue Finance

defined mandates Barriers” below

NGO or Donor Examples are being developed Limited pool of resources Meloy Fund
supported and tested in Indonesia
Tightly focused
Focused on specific sectors /
outcomes Robust business plan
required

20
Bohorquez, J. (2022). A New Tool to Evaluate, Improve, and Sustain Marine Protected Area Financing Built on a Comprehensive Review of Finance
Sources and Instruments. Frontiers in Marine Science. Retrieved from [Link]

20 Indonesia Blue Finance Policy Note

 Instrument Type Pro Con Examples

Other Bonds Impact / Outcome Payments linked to outcomes Has not been successfully
based Bonds or impacts designed yet in a marine /
MPA context in Indonesia

Sharia Financing Zakat Funds, Green Bond and Green Has not been tested
Green Sukuk Sukuk Framework exists in “blue” economy in
and accepted by financial Indonesia; restricted to
community asset financing

Market demand for “blue”

product as yet unknown

Trust Funds Govt GoI familiarity with these Capacity Constraints ICCTF
mechanisms and options
Subject to grant fund BPDLH
availability

NGO Familiarity in Indonesia, with Presently grant Blue Abadi Trust Fund
donors and NGO’s supported; (linked to BLU-D)

Transparent mechanism Transaction costs can be

high

Capital Markets Private sector Regulated by OJK Blue sector considered

Debt and Equity unfamiliar and risky
OJK developed sustainable
finance principles See “Blue Finance
Barriers” below

Impact Both equity and Very active in Indonesia esp. See “Blue Finance Aquaspark
Investments debt Aquaculture, fintech and Barriers” below
plastics

Philanthropy CSR Corporate Social Responsibility Funds often targeted Walton

(CSR) Fund or Environmental
Direct grants Improvement Fund (Dana Bina Limited to “one off” gifts Packard etc
Lingkungan)

Grants for livelihoods &

conservation

Development ADB, UNDP Significant MDB support Blue Sea Finance Hub
Partners

Blended Finance Philanthropy; Significant opportunity to Requires robust pipeline; The UN Global Coral
development scale, capacity and resources to Reef Fund; Tropical
partners; impact address transaction costs Landscape Finance
investment Good examples in Indonesia Facility

SDG Indonesia One

Debt for Nature Terrestrial Provides opportunity to unlock No marine or blue Seychelles & Belize
Swaps examples financing examples in Indonesia

Insurance Coral Reef Nascent pilots being developed No working models to

Insurance in Indonesia scale

Parametric Strong Partners

Insurance

Ecological Fiscal Unknown Unknown

Transfers

Indonesia Blue Finance Policy Note 21

 APPENDIX - 3
Blue Finance Discovery Process

1. Context & 5. Develop

2. Develop 4. Modalities &
Situational 3. Quantify $$ Implementation
Strategy Structures
Assessment Plan

The Blue Finance Discovery Process a systematic, • Identify marine related frameworks
phased approach consisting of (i) contextual and guidelines, as well as related
assessments; (ii) strategy development; (ii) pipeline governance implications, especially in
identification and quantification of investment the target sector.
requirements; (iv) identification of investment
structures and channelling modalities and (v) • Identify and map marine data
identification of investment implementation availability and gaps, as well as
capacity. This process will ensure that each resulting related governance implications,
strategy meets MoF design criteria, including (i) a especially in the target sector.
clear business case, addressing risks; (ii) definitions
of eligible use of funds and associated pipeline of • Identify and map key target sector
investments; (ii) detailed feasibility assessments and stakeholders.
proposed implementation strategies; (iv) governance
and implementation mechanisms; and (v) exit • Integrate those elements in the
strategy. context of Indonesia’s medium-term
development plan (RPJMN 2020-
• Context and Situational Assessment – 2025) and Vision 2045 target
to contextualize the enabling and policy
environment. Policies and frameworks • Strategy development – to define the
are assessed; governance requirements purpose of the intervention; determine
evaluated, and capital requirements whether a financing gap exists; identify
are broadly mapped. Data availability is and prioritize sources and uses of capital
considered, and risks identified and mapped. (including from NGO; private and public
The role of the public, private and NGO sector sector); risk mitigation requirements;
assessed, along with the identification of ecosystem impact; verification mechanisms;
relevant thematic instruments. the role of potential channeling options and
intermediaries (state owned, private, NGO or
• Identify and map the current state of the other)
target sector. This section should include
a further analysis of economic weight, • Define the expected outcomes based on
environmental impact, and risk exposure the pre-defined context.
of the target sector.
• Identify the financing context around
• Identify marine related policies those outcomes. This section should
and regulations, as well as related identify (I) a potential financing gap
governance implications, especially in and (ii) the current sources of capital to
the target sector. deliver expected outcomes.

22 Indonesia Blue Finance Policy Note

 • Break the overarching outcomes into context. This section should be
intermediate results. They should be quantitative and qualitative I.e, it should
broad and measurable through further define (I) the volume of financing
identified metrics. required as well as investment (ii) type
(whether assets or operating expenses)
• Identify target metrics aligned with and (iii) duration.
predefined results. Metrics should be
precise, measurable and display use • Identify target activities’ benefits. This
track-record in comparable projects. This section should identify additional
section should also lay down the future revenues and/or reduced costs occurring
verification mechanism. in a pipeline investment context. This
section should be based on realistic
• Identify target activities to achieve those and conservative assumptions drawn
metrics. This section should design from (i) comparable projects and (ii)
a pipeline through (I) pilot projects, existing scientific literature. Further in
including a community engagement this section, a sensitivity analysis should
process and (ii) comparable projects stress-test assumptions driving benefits.
assessment.
• Identification of potential cashflows. This
• Identification of the pipeline’s risk section should assess the translation
exposure and related risk mitigation of identified benefits into tangible
requirements. This section should cashflows analyzing (I) capture and (ii)
confront the outputs of a pipeline monetization opportunities.
risk assessment, including a double-
materiality analysis, with target metrics. • Identify targeted financial returns based
Drawing from this analysis, this section on pre-identified (I) benefits and (ii)
should identify key risk mitigation capital structure of the pipeline.
requirements across different sectors
and scales. Tasks under this section • Identify and map the pipeline’s financial
should be conducted in coordination risk exposure. This section should assess
with the Blue Finance Steering (I) the volatility of cashflows and (ii) the
Committee, as outputs might be related collateral structure.
to the enabling environment.
• Identify potential financial risk mitigation
• Capital requirements – Quantify the mechanisms. This section should identify
pipeline of investments and capital and map financial stakeholders and
requirements; understand cash flow and mechanisms to address pre-identified
collateral structures; duration of financing risks. This section should focus on
and expected returns; risk mitigation leveraging public funds to catalyze
mechanisms; role of public vs private markets private investment through risk-
mitigation solutions.
• Identify target activities’ financing
requirements. This section should • Identify and map target investor
identify the capital structure of the categories based on (i) the pipeline’s
pipeline. It consists of a financial gap target outcome, (ii) expected return, (iii)
assessment through pilot projects and capital structure and (iv) financial risks.
outputs extrapolation to Indonesia’s

Indonesia Blue Finance Policy Note 23

 • Channelling / Delivery options –instrument • Design and implementation of a
structuring options; credit enhancement Monitoring, Reporting a Verification
requirements delivery partners and framework. This section mostly focuses
mechanisms; pricing and transaction cost on gathering predefined metrics in the
modelling. structure design process. This section
is essential for pipeline’s sustainable
• Identify the best fitted financing financing on the long run as it (I) enables
mechanism to reflect the pipeline’s enhanced management of projects,
financial profile. This section should hence outcomes achievement, and (ii)
design a financing mechanism that it provides clearance and confidence to
would best match (I) the capital investors.
structure, (ii) benefit distribution and (iii)
financial risks of the pipeline. • Implementation of financial staff
training and capacity building. This
• Identify the most viable financial section should focus on training and
mechanism based on pre-defined target capacity building of the structure’ staff
investors’ needs and requirements. on financial management, including
This structure should (I) allow cashflow key financial metrics preidentified
maximization, (ii) allow and value non- part of the structure design process,
financial impacts, (iii) match regulatory including (I) financial requirements,
requirements, (iv) minimize transaction (ii) expected financial returns and (iii)
costs and (v) integrate all financial assets to be financed. Substantially, this
stakeholders. section consists of training staff on the
streamlined financial MRV framework
• Identify the best fitted channeling option. alongside investment lifecycle, from due
This section should design a channeling diligence to reporting.
option that would (I) ensure an optimal
allocation of funds to pipeline’s projects • Implementation of non-financial staff
to (ii) align financial investors and training and capacity building. This
pipeline stakeholders’ interest. This section should focus on training and
section should focus on options’ (I) capacity building of the structure’s staff
capacity, (ii) track-record and (iii) network on non-financial management, including
to minimize transaction costs. key non-financial metrics predefined
part of the structure design process,
• Implementation and exit strategy- including (I) environmental and (ii)
implementation for the proposed strategy; social impact metrics. Substantially, this
ensuring ecosystem impacts and financial section consists of training staff on the
targets can be attained; realistic exit strategy streamlined financial MRV framework
alongside investment lifecycle, from due
• Official implementation of the financing diligence to reporting.
structure, from mechanism to
channeling bodies. This section should • Implementation of marketing
focus on legal status of such a structure efforts. This section should focus
and its integration in the Indonesian on communicating on the financing
financial framework. A strong and structure to benefit from reputational
integrated coordination process between effects. Those effects will benefit
financial counterparts, including, the Indonesia through different ch.
Ministry of Finance, Bappenas, investors
and the implementing agency is
mandatory.

24 Indonesia Blue Finance Policy Note

APPENDIX - 4
Structure of the Blue Finance Advisory Committee

Figure 1. Blue Finance Advisory Committee

Given the multiplicity of initiatives and activities in the blue economy, along with the need to effectively
coordinate activities, and the intention of integrating sustainable blue financing as part of national goal,
Bappenas will take a lead as Coordinator of the proposed Blue Finance Steering Committee.

Indonesia Blue Finance Policy Note 25

 Bappenas is expected to play role as coordinator with 2. Responsible for formulating general and technical
details as follows: policies for the Finance Strategies, including asset
allocation and overall evaluation.
- To coordinate and formulate policies in the
fields of development planning, national
3. Supporting the program in coordinating the funds
development strategy, providing direction to
with Ministry/Agency, development partners,
sectoral, cross-sectoral, and cross-regional
civil community organizations, private sectors,
policies, national and regional macro-
and other financial institutions to manage
economic framework, engineering design
the implementation of the program and their
of facilities and infrastructure, framework
activities.
of regulations, institutions, and funding,
and in the field of monitoring, evaluation,
Ministry of Finance (MoF) is expected to play a role
and managing the national development
as follow; Formulating, stipulating, and implementing
implementation with regards to the proposed
policies in terms of budgeting, taxes, customs and
BFAC.
excise, treasury, State assets management, fiscal
balance, and budget financing and risk management
- Second, to coordinate the seeking out
to support BFAC. Also, managing State properties/
of domestic and foreign sources of
assets that are under the responsibility of Ministry of
financing, and in the allocation of funds.
Finance to support BFAC; Holding education, training,
Furthermore, to coordinate and synchronize
and competence in terms of State finance; and
the implementation of policies national
providing substantial support to entire elements of
development planning and budgeting BFAC.
organization in the Ministry of Finance
Finally, to coordinate strategic activities in the
handling of urgent and large-scale problems,
The line Ministries will play role to play role as:
in accordance with the specially assigned
Formulating, stipulating, and implementing policies
tasks
in terms of internal or in region. OJK plays role as
bridging with private sector, Banks and financial
The committee’s main roles are as follows:
institution non-Bank to support BFAC. Donor as part
who provide funding to support BFAC will be give
1. Provide strategic plan and review the advice to BTT about the progress. Represent from
implementation Academic and Business Association mainly mission
provide advice or input to coordinator of BFSC.

26 Indonesia Blue Finance Policy Note

Indonesia Blue Finance Policy Note 27
 BLUE FINANCE
INSTRUMENTS GUIDLINE
Ministry of National Development Planning/ National Development Planning Agency (Bappenas)

28 Indonesia Blue Finance Policy Note