Blue Sukuk: Indonesia's sustainable ocean finance revolution

Indonesia, boasting the world's largest archipelago, stands as a custodian of immense marine riches. Despite contributing modestly to its economy, the marine sector, encompassing fisheries, tourism, and conservation efforts, holds vast potential. With fisheries accounting for over 2.5 per cent of the national GDP, coupled with a substantial workforce in fishing and aquaculture, Indonesia's marine bounty presents a compelling case for sustainable resource management. Against the backdrop of UN SDG No. 14, Blue Sukuk emerges as a transformative financial instrument poised to redefine Indonesia's approach to marine conservation and economic growth.

UNVEILING BLUE SUKUK-- A SHARIAH-COMPLIANT PATH TO MARINE SUSTAINABILITY: Blue Sukuk, a Shariah-compliant financial vehicle, directs funds towards environmentally sustainable marine and coastal projects. Distinguished by its thematic focus on the blue economy, this instrument merges Islamic finance principles with the imperative for ocean preservation. Offering both ethical and ecological returns, Blue Sukuk appeals to investors keen on fostering marine and coastal stewardship while reaping financial rewards.

THE SDG SECURITIES FRAMEWORK: GUIDING INDONESIA'S SUSTAINABLE FINANCE TRAJECTORY: Indonesia's strides in sustainable finance are underscored by sovereign blue bonds and green Sukuk issuances, complemented by the establishment of the SDGs Government Securities Framework. Aligned with international standards, this framework sets the stage for sovereign issuances of green, blue, social, and sustainability bonds and Sukuk. By adhering to principles advocated by organiaations like the International Capital Market Association, Indonesia positions itself to harness its marine resources responsibly through blue Sukuk issuance.

INDONESIA'S GATEWAY TO DIVERSIFIED INVESTMENTS: While the global blue bond market remains nascent compared to its green counterpart, Indonesia's prominence in the Sukuk market presents a gateway to diversification. With 26 blue bond transactions totaling US$5 billion between 2018 and 2022, the momentum is palpable. Indonesia's introduction of Blue Sukuk not only expands the market but also fosters investor confidence, paving the way for sustainable financing of marine ventures.

A CATALYST FOR ECONOMIC GROWTH: Indonesia's marine-based sectors, including fishing, aquaculture, and fish processing wield substantial economic influence. With these sectors contributing significantly to the nation's GDP, the potential impact of blue Sukuk in fostering sustainable growth is undeniable. By infusing capital into these critical sectors, Blue Sukuk lays the groundwork for economic expansion while safeguarding marine ecosystems.

IMPACT AND OUTLOOK-- INDONESIA'S PIONEERING ROLE IN SUSTAINABLE FINANCE: Indonesia's venture into blue Sukuk marks a paradigm shift in sustainable finance. Building on past successes such as samurai blue bonds and green Sukuk, this initiative solidifies Indonesia's position as a global leader in innovative financing. Beyond financial gains, blue Sukuk offers a blueprint for balancing environmental integrity with economic prosperity, setting a precedent for global adoption.

REGULATORY IMPERATIVES-- NAVIGATING POLICY TERRAIN FOR SUSTAINABLE FINANCE:  The success of Blue Sukuk hinges on a supportive regulatory framework. With proactive engagement from government agencies like Bappenas, Indonesia is poised to enhance policies and regulations to accommodate the evolving landscape of sustainable finance. Strengthening regulatory mechanisms will be pivotal in ensuring the efficacy and sustainability of Blue Sukuk initiatives.

CHARTING A SUSTAINABLE FUTURE THROUGH BLUE SUKUK: Indonesia's potential issuance of Blue Sukuk heralds a new era in sustainable finance. Beyond financial innovation, it signifies a commitment to safeguarding marine ecosystems for generations to come. With Indonesia's expertise in the Sukuk market and its pioneering efforts in green finance, sovereign Blue Sukuk issuance has the potential to position the nation as a global vanguard in sustainable finance.

Md. Touhidul Alam Khan is Managing Director & Chief Executive Officer of National Bank Limited and the first certified sustainability reporting assurer (CSRA) in Bangladesh.