Proceedings of the 1st International Conference on Contemporary Risk Studies, ICONIC-RS 2022, 31 March-1 April 2022, South Jakarta, DKI Jakarta, Indonesia

Research Article

Preferences of Green Sukuk in Environmental Projects (Case Study in Indonesian Power Industry)

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  • @INPROCEEDINGS{10.4108/eai.31-3-2022.2320674,
        author={Maulana  Prahaji and Tika  Arundina},
        title={Preferences of Green Sukuk in Environmental Projects (Case Study in Indonesian Power Industry)},
        proceedings={Proceedings of the 1st International Conference on Contemporary Risk Studies, ICONIC-RS 2022, 31 March-1 April 2022, South Jakarta, DKI Jakarta, Indonesia},
        publisher={EAI},
        proceedings_a={ICONIC-RS},
        year={2022},
        month={8},
        keywords={green sukuk indonesian power industry project financing debt services coverage ratio coupon},
        doi={10.4108/eai.31-3-2022.2320674}
    }
    
  • Maulana Prahaji
    Tika Arundina
    Year: 2022
    Preferences of Green Sukuk in Environmental Projects (Case Study in Indonesian Power Industry)
    ICONIC-RS
    EAI
    DOI: 10.4108/eai.31-3-2022.2320674
Maulana Prahaji1, Tika Arundina1,*
  • 1: Faculty of Economics and Business, University of Indonesia
*Contact email: tikarundina@gmail.com

Abstract

Increasing interest in climate change adaptation requires countries to integrate financial instruments into more sustainable initiatives. The green sukuk, as one of the Islamic financial instruments used for this purpose, has not met expectations even though others continue to show exponential growth. Therefore, this study aims to analyze the factors causing the low issuance of green sukuk and simulate the green sukuk issuance scenario for project financing. It was achieved through a mixed-method methodology conducted with the participation of players in the Indonesian power industry. As a result, it was revealed that the most significant factors in deciding to issue green sukuk are issuance costs and incentives, which were not optimal. This study provides the simulations which impact decreasing issuance costs and increasing the available cash flow ratio for the coupon.