Making development legible to capital: The promise and limits of ‘innovative’ debt financing for the Sustainable Development Goals in Indonesia

The SDGs: An investable proposition

Writing on trends in development policy and practice that were unfolding in the lead up to the SDGs, Emma Mawdsley (2018a: 265) suggests that we are witnessing ‘a deepening nexus between financial logics, instruments and actors, and “intentional” development: that is, the ideologies, programmes and practices of the “mainstream” international development community.’ She attributes this financialisation-development nexus to a confluence of factors beyond the SDGs, including changing geographies of foreign aid and development cooperation, and of wealth, poverty and inequality (Mawdsley, 2017; 2018a). In this particular conjuncture, however, the SDGs provide a ‘legitimating veneer to the development industry's current work to create investment opportunities in “frontier” economies’ (Mawdsley, 2018b: 193). Indonesia is such a frontier – a site of discoveries and opportunities – with its vast natural resources, rising middle class (consumer base) and large working population (labour force) (IMA Asia, 2016).

In this deepening nexus, a key narrative goes that as the custodian of large pools of finance capital, only the private sector can bring SDG finance at scale, and that, given the right conditions, ‘large-scale capital eagerly awaits the right kinds of projects’ (Cohen et al., 2021: 2). Proffered as a prize for the private sector, the SDGs are said to harbour a US$ 12 trillion per annum business opportunity in four sectors alone – food, cities, energy and materials and health and well-being – with developing countries accounting for more than half the value of SDG business opportunities (AlphaBeta, 2017; Guterres, 2019; OECD, UNDP, and Ministère de l’Europe et des Affaires Étrangères, 2020). ³ Yet, underinvestment in these sites of immense possibilities remains prevalent. This, as the Addis Ababa Action Agenda on Financing for Development makes explicit, is attributed, in part, to:

an insufficient number of well-prepared investable projects, along with private sector incentive structures that are not necessarily appropriate for investing in many long-term projects, and risk perceptions of investors (United Nations 2015: para 47).

Put simply, it is not a lack of money, but a lack of investable projects with the right risk-reward profile and appropriate incentives that hinder private sector participation in financing the SDGs (See also Development Committee, 2015; Nassiry et al., 2016). The assumption, then, is that unlocking finance for the SDGs hinges on growing the availability of investable projects.

Nothing perhaps expresses this more clearly than the increasing purchase of ‘bankability’ and ‘scalability’ to complement ‘sustainability’ in interventions designed to align private finance with the SDGs (Guterres, 2019; OECD, UNDP, and Ministère de l’Europe et des Affaires étrangères, 2020). Many development institutions operating within and across national borders are now busily involved in seeking and marketing bankable and scalable development interventions, including innovative financing instruments, to attract finance capital (See Climate Bonds Initiative, 2022; Joint SDG Fund, 2023; OECD, 2020; UNCTAD, 2017; 2018; United Nations Indonesia, 2021; UN DESA, 2022b). The aim is not only to make development interventions sufficiently bankable (and therefore investable), but also replicable or transferable from one context to another (and therefore scalable) (UNDP, 2018).

The making of such interventions, it has long been noted, necessarily depends on a categorical logic to figure subjects, objects and relationships ‘that capital can see’ to make them amenable to financial calculation and management (Robertson, 2006: 367; see also Gabor and Brooks, 2017; Hilbrandt and Grubbauer, 2020; Sullivan, 2018). With regard to this way of seeing, a key debate emerging within the broad ambit of financialisation in conservation and development centres on the translation and integration of social and environmental ‘externalities’ into categories of manageable risk. Risk, writes Bracking (2019: 710), ‘benefits from being already central to the lexicon of finance capitalism.’ Tripathy's (2017) ethnographic research on green bonds standards is illustrative of this, demonstrating how the practice of labelling projects as green revolves around the identification and management of green risks. In this endeavour, environmental uncertainties are translated into material risks that can be valued and incorporated into financial decisions and management (e.g. how climate may affect the future value of projects/assets) (Tripathy, 2017; see also Schmidt and Matthews, 2018). This translation, as Jen Christiansen (following Jen Beckert) argues in their study on marine conservation ‘blended finance’, forms fictional expectations, ‘in the sense that no serious truth claims can be made regarding events that lie in the future’ but nevertheless shapes investors’ expectations (Beckert as cited in Christiansen, 2021: 95).

The notion of bankability informs such states of expectation. Whether an investment is bankable depends on the calculation of risks to assure investors that the proposed investment is safe, which goes beyond the features of the investment alone (Nassiry et al., 2016). It is equally shaped by a set of ‘enabling conditions’ – the appropriate legal and regulatory framework, creditworthiness, perceived credibility and institutional capacity – determining the probability of the investment to meet its social, environmental and financial goals (Nassiry et al., 2016). In other words, the bankability of an investment demands simplifications that stabilise the fluid dynamism of social, environmental and political milieus to make investments safe under conditions of uncertainty.

In the case of green bonds, their production, value and sale similarly rest on (speculative) modes of abstraction that are sufficiently credible to convince participants to engage in new markets (Bracking, 2015; 2019). Here, standards bring such credibility, ‘making perceived greenness visible’ (van Veelen, 2021: 135, emphasis in original; see also Bracking, 2015). This is accomplished through what Perkins (2021: 2045) calls ‘a lenient zone of qualification,’ which ‘establishes broad protocols over process but has permitted a high degree of decentralised regulatory plasticity with regard to the meaning of green.’ For instance, the Green Bonds Principles – a voluntary process guideline on green bond issuance – focuses (as expected) only on process, where greenness is ascertained through whether issuers possess the right governance arrangements with regard to project selection, use and management of proceeds and reporting (International Capital Market Association, 2021). The establishment of greenness, as such, is once-removed from the objects of investments. Finance, then, does not necessarily land where the most significant environmental or social contribution could be made. Rather, where finance lands hinges on how greenness or sustainability comes to be defined, valued and accepted within a particular green/sustainable economy that is being assembled (Asiyanbi, 2018; 2021; van Veelen, 2021).

On this point, Rethel's Debordian view of capital market development in Southeast Asia is deeply relevant. ⁴ Rethel (2018: 191) argues that financialisation, to a considerable extent, is not about outcomes per se, but about facilitating process that sustains, and is sustained by, ‘the promissory future of finance.’ This is mediated through the re-enactment, circulation and validation of specific forms of knowledge to legitimate capital market development (Rethel, 2018). Routine, standardised valuation of greenness and sustainability that accompanies the issuance of thematic bonds is one means through which such knowledge travels. Standardised valuation, some suggest, is therefore significant not so much for the way it influences the attributes and outcomes of projects to be financed, but for the way it legitimates the market development they promote (Hilbrandt and Grubbauer, 2020). It helps form, in short, a legible terrain where capital would land.

Simplification and legibility: On the recursion of high modernism

The valuation and standardisation techniques deployed to align private finance with the SDGs are characteristic of the high modernist ideology that Scott ([1998] 2020: 4) describes in Seeing Like a State as ‘a faith that borrowed, as it were, the legitimacy of science and technology.’ Like the high modern schemes detailed in Seeing Like a State, forging such an alignment is inevitably schematic, in which careful planning is needed to constitute a field of intervention that makes commensurate social, environmental and financial goals (Scott [1998] 2020). Thus, as aforementioned, environmental concerns become subsumed in the financial grammar as categories of green risk, the management of which necessitates specific technical expertise that transcends context. There is, then, a continuity between the work to align private finance with the SDGs and the high modern schemes of Scott's critique, in terms of the concern to delimit and discipline the logics and techniques of governance. In this light, what of innovation? The post-2015 development landscape is awash with innovations purportedly aiming to do development differently (UNDP 2018). As the UNDP puts it, ‘[t]he sheer scope of the SDGs requires us to invest in disrupting old ways of working, to imagine, design and test new forms of infrastructures and platforms’ (UNDP, 2018: 8).

Indeed, many development interventions no longer embody the archetypal forms (or styles) of seeing and governing that Scott critiques (see Johns, 2019; Li, 2005). Approaches to bring SDG finance at scale seem to deviate from high modernist tendencies, favouring experimentation over rigid planning: to ‘innovate, test and iterate to find the most effective interventions’ (UNDP, 2018:28). The proliferation of financing labs dedicated to designing and testing innovative instruments to scale up SDG finance is expressive of this. ⁵ The connotation of the ‘lab’ suggests a kind of change that Scott ([1998] 2020) advocates as an antidote to high modernist planning: to design in, rather than ignore, more experiential, open-ended knowledge into policy and practice. The leeway afforded in the implementation of the SDGs also seems to eschew top-down, homogenising tendencies of high modern planning (Biermann et al., 2017). These circumstances share some resemblance with what Johns (2019: 853; 863) stylises as a shift from planning to prototyping insofar as they engender the ‘possibilities being worked up iteratively and inductively,’ a shift that demands attention to the ‘politics of prototypical technique, rather than… the politics of the master plan.’

While attention to the politics of prototypical technique is certainly needed, there are at least two things that can potentially become lost in juxtaposing ‘planning’ with ‘prototyping’. First, prototypical techniques are not new. A prototype is ‘the first example of something… from which all later forms are developed’ (Cambridge Dictionary, 2023). Pilot projects – long-existing and ubiquitous forms of development interventions – are, for all intents and purposes, prototypes: experimental objects designed to be ‘tested’ and reworked (Li, 2007; Massarella et al., 2018). Thematic bonds, too, are objects from which all later forms are developed (Bracking, 2019). Second, and relatedly, this juxtaposition renders the relationship between planning and prototyping less thinkable. Recall, however, that Scott ([1998] 2020), writing on scientific forestry, conveys that a planned environment such as monocropping provides a legible terrain with which to conduct experimentation ‘that could be codified and taught’ to further advance scientific forestry (Scott [1998] 2020: 20). In the case of green and SDG bonds, their production, sale and replication cannot proceed without planning to standardise what is eligible for green/SDG financing (Lazarova, 2016; OECD, 2021), itself a project of legibility at a global scale. Planning and prototyping, in this instance, provisionally co-shape and reinforce one another in attempts to produce interventions that could be categorised, learned and replicated within and across scales.

This aspiration to standardise greenness and sustainability is resolutely high modernist, but this does not mean it is not iterative. It is necessarily so because simplification and legibility are prone to failures and contradictions: they rarely do what they ought (Scott [1998], 2020; see also Blomley, 2008). These failures and contradictions are themselves productive grounds for interventions, feeding what Li (2005) calls the ‘general problematic of “improvement”:’ a continuing effort to rectify the deficiencies of development interventions. But interventions to remedy the undesirable consequences of high modernist schemes are often recursive, in the sense that they are thought out within the bounds, and therefore distil and reinscribe (at least partially), a narrow set of objectives and optics (Li, 2005; Scott, [1998] 2020). Li's (2007: 231) account of a World Bank village development programme in Indonesia, for example, shows that while the project sought to understand village life from the ‘bottom-up’, the resultant diagnosis and interventions remained the purview of experts who saw poverty through a lens that excluded many political-social matters ‘from the program's knowable, technical domain.’ In contemporary tech-based climate governance, Leiter and Petersmann's (2022) inquiry into prototypical techniques demonstrates the ways in which high modernist tendencies remain pronounced in innovations for climate challenges, many of which claim to attend to local context while aspiring for universal application. Troubled with experimental failures emerging from valuation techniques that sought commensurability across difference, the financialisation of development, too, builds on earlier iterations of commodification and financialisation of socionatures (See Bracking, 2019; Robertson, 2006; Sullivan, 2018; Tripathy, 2017). As Bracking (2019: 724, emphasis added) puts it, ‘[c]oncepts of carbon, greenness, resilience and insurance-based accounting, each loosely derived from the phases of a deepening financialisation, come together and correlate in acts of contingent becoming.’ These contiguous phases of deepening financialisation reify a polity where capitalism is reproduced – time and again – through the project of social and ecological repair (Cohen et al., 2021). These examples alert us to look beyond binary prisms such as ‘planning’ and ‘prototyping’, and to refrain from distinguishing too sharply and too readily between what is old and new.

Plans: Developing a common language

Creating ‘an environment conducive to innovation’ is a key objective of the Indonesian Financial Services Master Plans (2015–2019; 2021–2025) (OJK, 2021a: 37). It also features in Indonesia's medium-term development plans, SDG action plans and the SDG roadmap, all of which are national translations of the SDGs (BAPPENAS, 2015; 2017; 2020; 2021; OJK, 2014; 2015; 2021a; 2021b). In the Indonesian context, the financialisation-development nexus thus materialises through the articulation between national development ambitions and capital market development, with the premise that the latter would provide a substantial source of financing for the realisation of the former (BAPPENAS, 2017; 2020; OJK, 2021b).

With reference to green and SDG bond markets, their emergence and growth are intertwined with the creation of a common language and best practice by those who populate and animate the sustainable finance landscape, or ‘ecosystem’ as it is referred to in official discourse (OJK, 2021b). As the Chair of the Indonesian Financial Services Authority or Otoritas Jasa Keuangan (hereafter OJK) puts it, an understanding on what constitutes sustainable finance and projects, one that is internationally shared, is needed to form scalable innovative financial products (Santoso, 2021). There are at least two notable developments towards the establishment of this common language.

One is the enactment of a regulation on the issuance of green bonds: POJK No. 60/2017 (OJK, 2017). This is an output of the first phase of the Sustainable Finance Roadmap, a part of the more-encompassing Financial Services Master Plan 2015–2019. To be legible to international finance, the regulation reproduces much of what is laid out in the Green Bond Principles, with the exception that 30% of the green bond's proceeds can be used outside of ‘green’ purposes (OJK, 2017). In essence, it sets out the procedures and terms on the issuance of green bonds, from project selection (including a list of eligible sectors for financing) to annual reporting and sanctions in cases of unmet obligations (OJK, 2017). Greenness, in this instance, is established by disclosing categories of projects; intended environmental targets; the process and method through which the issuer identifies and manages social and environmental risks; and a summary of opinion of the green bond framework by an environmental expert (OJK, 2017: Art 7.a). Reporting on the use of proceeds is mandatory, but it does not need to specify whether the intended environmental targets are met (OJK, 2017: Art 10–11).

The second is the Indonesia Green Taxonomy, launched in 2022, a part of the second phase of the Sustainable Finance Roadmap. A key aim is to encourage innovation in green financial products and services, including green bonds, by providing ‘an overview on the classification of sectors/subsectors that have been scientifically categorised as green, to avoid greenwashing practices’ (OJK, 2022b: 11, emphasis added). The taxonomy is based on the Indonesia Standard Industrial Classification (Klassifikasi Buku Lapangan Usaha), a substantial part of which refers to the International Standard Industrial Classification of all Economic Activities published by the United Nations Statistics Division (UNSD), presumably to promote interoperability (OJK, 2022b). It is also benchmarked against other green taxonomies, notably those of China, European Union and ASEAN (OJK, 2022b). Green classification in the taxonomy refers to activities that ‘do no significant harm, apply minimum safeguard, provide positive impact to the environment and align with the environmental objective of the taxonomy’, with yellow signifying no significant harm and red being harmful (OJK, 2022b: 14). This classification, however, is subject to adjustment. The taxonomy is posed as a living document to accommodate ‘diverse approaches in determining green criteria thresholds’ and ‘new business activities, changes in standards and policies, as well as scientific development and technological advancement’ (OJK, 2022b: 11–12).

There are at least three things worth noting with regard to how greenness is constituted through these policy and regulatory designs. One is that the design of Indonesia's sustainable finance ecosystem, and the boundaries and rules governing this ecosystem, is considerably shaped by the financial services industry (OJK, 2022b). This is an industry known for its perfunctory and patchy engagement with sustainability. The integration of social and environmental assessments ‘for big scale and high-risk’ loans and investments, for example, has long been mandated in the 1998 amendments to the 1992 Banking Law (Government of Indonesia, UU 10/1998). Still, decades later, these assessments rarely take place, and when they do, such assessments are often done in a cursory manner (Setyowati, 2020). Increasing industry competencies on sustainability is itself a key objective of the Sustainable Finance Roadmaps (OJK, 2014; 2021b; Interview 6 23 March 2022). Yet, in 2021, OJK established a Sustainable Finance Taskforce, comprising only of representatives from banks, capital markets and non-bank financial institutions, to further the development of Indonesia's sustainable finance ecosystem (OJK, 2022a). In playing a key part in the design of policies and regulations governing its own conduct, the financial services industry may well construct ‘a world of finance that seeks to reconstitute (claims of) ‘the social’ and ‘the environmental’ in its own image’ (Asiyanbi, 2021: 9).

The second, relatedly, concerns the reproduction of a utilitarian view of ‘the environment’. Although the green taxonomy is cast as a living document, it fixes an understanding of the environment, and its relation to the notion of sustainable development. Here, ‘the environment’ (including the resources contained within it) is couched in terms of its utility to ‘continuously support the economy in a sustainable manner,’ understood as ‘economic capital assets’ (OJK, 2022b: 13). Environmental (and social) concerns are conceived of as credit risks in need of ‘identification, measurement, mitigation, supervision and monitoring processes’ (OJK, 2022b: 20).

The third concerns the aesthetic of an objective scientific order. The database that forms the taxonomy is accompanied by an appendix disclosing the process of its making: from the conceptual framework setting out the objectives of standardisation to analyses of plans, policies, regulations and international commitments informing the classification of green, yellow and red, all of which received ministerial assessment and confirmation (OJK, 2022b). But it would be negligent to infer objectivity from this seemingly rigorous assessment. A closer look at the database itself reveals a much more arbitrary and cobbled picture. It is curious, for example, that ‘activities of government agencies in the fields of mining, electricity, water and gas’ and ‘tobacco plantation’ fall automatically into the green classification, which means no further qualification of greenness is necessary (OJK, 2022b). All these speak to the ways in which planning constructs a legible terrain – a field of intervention – that is conducive to certain kinds of ‘prototyping’, as exemplified in the issuance of Indonesia's first corporate green bond ‘prototype’ below.

Prototypes: Reinscribing conventions

Indonesia's first corporate green bond – worth IDR 500 billion (approximately US$33.7 million) – was issued in 2018 by PT SMI, a state-owned infrastructure financing facility under the Ministry of Finance (PT SMI, 2018a). At the time, ‘there were no benchmarks for the issuance of green bonds in Indonesia’ and OJK's green bond regulation ‘had not been tested’ (World Bank, 2018). Through this pioneering role, PT SMI considers itself to be an ‘ecosystem enabler’ in helping to build industry ‘know-how’ on green bond issuance (PT SMI, 2019b). In the issuance process, it did everything a credible issuer would do in keeping with international best practice. It established a Green Bond Framework, with the World Bank providing financial and environmental expertise in its design (World Bank, 2018). The framework is compliant with OJK's green bond regulation, and consistent with the Green Bond Principles and the ASEAN Green Bond Standard (PT SMI, 2018b). The framework solicited a second party opinion from CICERO – Centre for International Climate and Environmental Research – who rated it ‘medium green’ based on PT SMI's ‘sound approach to green financing for business activities that protect and/or improve the quality or function of the environment’ (CICERO, 2018: 2). And it has since produced annual reports on the use of proceeds to bondholders (PT SMI, 2019a; 2020a; 2021a).

However, if the additionality – and indeed the innovative element – of a green bond is that it can unlock cheaper, long-term capital to environmentally beneficial projects that would otherwise not be financed (Jones et al., 2020), then no additionality was realised through the issuance of PT SMI's green bond. In this case, all of the bond's proceeds were used to refinance existing projects (PT SMI, 2021a; 2020; 2019). In addition, while acquiring a green label incurred additional cost and time, investors remained primarily motivated by financial returns (Syahruzad, 2021). Given market conditions, the green bond had to offer comparable returns to conventional bonds to attract investors, with 7.55% and 7.80% interest rates paid by PT SMI, to mature over 3 and 5 years, respectively (Amanda, 2019; World Bank, 2018). This echoes a recent market survey among securities companies and investment banks in Indonesia: that ‘investors’ decisions are primarily influenced by the rating of the bond, reputation of issuers, the tenor of the bond (prefer short tenors), guarantor, and the coupon rate’ (Wijaya et al., 2021: 2).

Even if the bond had provided cheaper, longer-term capital, as is the case with Indonesia's sovereign SDG bond (Ministry of Finance, 2021), this may not necessarily lead to the realisation of environmental objectives. Consider the expert-based valuation designed to appraise sustainability credentials. In this appraisal, sustainability itself is ambiguously translated and valued. CICERO's grading methodology, for example, assigns shades of green based on ‘exposure to climate risks,’ with dark green being the least exposed (CICERO, 2018: 6). Exposure to climate risks, here, is neither quantified nor linked to specific environmental outcomes. Rather, it is assessed through PT SMI's existing governance arrangements on risk identification and management, monitoring, reporting mechanisms and so on (CICERO, 2018). The same goes for the second party opinion provided by CICERO to Indonesia's SDGs Government Securities Framework, which is based on, among other things, Indonesia's ‘capacity for anticipating and assessing adverse social risks when selecting eligible green and social projects’ (CICERO, 2021: 5). This effectively means that the designation of greenness or assessment of social benefits and risks are based on the issuers’ risk profile, not the projects themselves (Bracking 2019). In practice, this produces an abstract, if not nominal, accountability: one that provides investors with a green or social stamp, while distancing them from the actual environmental and/or social outcomes of their investments.

When quantification of (estimated) outcomes is performed, it too produces reductive specifications. For example, one of the three eligible projects PT SMI refinanced through its green bond proceeds was the Greater Jakarta Light Rail Transit (LRT), which it claimed would contribute to SDGs 1 (no poverty); 3 (health and well-being); 5 (gender equality); 8 (decent work and economic growth); 9 (industry, innovation and infrastructure); 10 (reduced inequality); 11 (sustainable production and consumption) and 13 (climate action) (Syahruzad 2021). In its annual green bond reporting, however, its estimated environmental impacts are confined only to ‘greenhouse gas emissions avoided (carbon dioxide equivalent)’ and ‘energy savings’ (PT SMI, 2021a; 2020; 2019a). No other environmental or social impacts are disclosed. The review report by an ‘environmental expert’ appended to each annual report is similarly reductive, generally only reporting on whether the project selection and allocation of proceeds remain consistent with the Green Bond Principles and reaffirming the positive environmental impacts already disclosed by PT SMI (PT SMI, 2021a; 2020; 2019a). This impact legibility erases possible tensions among the many goals the project claims to advance. The development of the Greater Jakarta LRT is not without controversy, with concerns raised over evictions during land acquisition and transit-induced gentrification associated with commercial and residential developments (Embu, 2018; Jakarta Legal Aid Institute, 2017). Yet, the risk of reinforcing old and creating new socio-economic boundaries in the city landscape is overlooked.

But invisibilising risks/impacts that can unsettle the promise of a triple bottom line is inherent in innovating or ‘prototyping’ for market success. By issuing Indonesia's first corporate green bond, PT SMI aimed to not only raise finance but to help develop the market, drawing lessons from the process to bring back ‘to the ecosystem’ and fostering the knowledge industries needed for green bonds to grow (Dalel, 2020). Other issuances of differently denominated thematic bonds by the government of Indonesia are concerned largely with gauging investors’ needs – how investors in different markets view sustainability and its relation to risks and returns – which is necessary ‘if Indonesia wants to ensure that the issuance of these instruments will gain success in the market’ (Interview 3 26 November 2021). Here, it is typical for the issuer to organise (global) roadshows (or non-deal investor updates) to showcase, and solicit feedback on, the bonds on offer, as the Ministry of Finance did for the SDG bond, green bonds and green sukuk (Islamic Sustainable Finance & Investment, 2019; Ministry of Finance, 2021). The lessons gleaned from these issuances also generally centre around further ‘deepening’ the market: how to construct the right incentives for issuers, given the additional cost of establishing greenness; how to ensure interoperability between international standards; how to do proper reporting; how to build the ‘right expertise’ and so forth (Syahruzad, 2021).

Financial innovations for the SDGs, then, do not change conventions. Instead, they iteratively reinscribe conventions, emphasising and transposing the logic and techniques of finance – such as credit ratings and risk-return ratio – in the production and sale of green and SDG bonds. In so doing, they circulate, reproduce and reify technical, financialised interventions that erase the unevenness of capital market development, but that create internationally recognisable forms of credibility, irrespective of outcomes (Rethel, 2018).

Financial returns to bondholders, though, are assured. By and large, this means that green or SDG bonds’ underlying projects (or assets) have to be bankable. The availability of bankable project pipelines – at the right volume and scale – is key to scaling up innovations like SDG and green bonds (Climate Bonds Initiative, 2022), a discussion we now turn to.

Project pipelines: Seeing bankability

In his opening remark to a session during the 2019 SDG Investment Fair, James Zhan (2019), Director of Investment and Enterprise at the UN Conference on Trade and Development (UNCTAD), pointed out that it is the difficulty of finding bankable project pipelines that inhibits the ‘good will’ of the private sector to invest in the SDGs and ‘the political will’ of governments to achieve the SDGs. What this implied, however, is that irrespective of good will, green or sustainable qualities are, by themselves, inadequate to unlock private finance for the SDGs. Indeed, as President of Global Capital Finance Juergen Moessner (2019) plainly stated during the session, ‘for something to be investible, there has to be a return.’ He applauded Arifin Rudiyanto, the Indonesian Deputy Minister for Maritime and Natural Resources Affairs, for Indonesia's well-prepared project pipelines (presented minutes earlier), but pointed to a ‘missing link’ in the effort to attract private finance: ‘that it is always presented from a need basis,’ which ‘from an investor point of view is not that relevant’ (Moessner, 2019). What matters is the prospect of a reliable revenue stream. Everything else, including the project's contribution to the SDGs, is ‘qualitative enhancement’ (Moessner, 2019).

This kind of exchange, not uncommon in SDG finance gatherings, help shape and validate ‘intentional’ development oriented around growing bankable project pipelines (UN DESA, 2018; 2019; 2021; 2022a). In Indonesia, increasing bankable projects – ‘transforming needs into opportunities’ – is institutionalised as a development objective in its own right (Martini as cited in Ministry of Finance, 2018). In 2018, SDG Indonesia One – a financing platform managed by PT SMI – was launched to support the attainment of the SDGs through infrastructure financing (Ministry of Finance, 2018). It functions as a blended finance platform, where it manages public and private funds to be channelled through project development, de-risking, financing and an SDG equity fund, providing ‘integrated project financing (end-to-end financing) from the initial stage of project development to financing through equity investment’ (PT SMI, 2019b: 42).

In and of itself, the appointment of PT SMI as the implementing agency of SDG Indonesia One raises the platform's legibility to financiers. It is a state-owned enterprise closely associated with the Ministry of Finance, with a track record of managing funds from various sources, accreditation with the Green Climate Fund and ‘investment grade’ credit rating (AAA domestically and BBB/Stable internationally) (ADB, 2022b; Fitch Ratings, 2021; PT SMI, 2021b). PT SMI, in other words, is seen as a credible partner to donors and investors. Many who have pledged money to SDG Indonesia One have previously worked with PT SMI, such as the International Finance Corporation (IFC), Agence Française de Développement (AFD) and Deutsche Investitions- und Entwicklungsgesellschaft (DEG) (ADB, 2022b).

A significant proportion of the money pledged to SDG Indonesia One is earmarked for project development (PT SMI, 2018a; 2021b). This is because ‘designing an optimal risk-sharing protocol at the project development phase is at the crux of ensuring bankability’ (Rana, 2017). In 2021, technical assistance for project development used up 85% of total funds realised (PT SMI, 2021b). A key aim in the disbursement of loans from the Asian Development Bank (ADB) to SDG Indonesia One, for example, is to reduce ‘credit risk in projects to a level that is sufficient to attract commercial lenders’ (ADB, 2022b: 5). Note, however, that much of this capital is redistributed through loans by PT SMI. Access to it is therefore based on the ability of (sub)projects and (sub)borrowers to service the loan (ADB, 2022b). As the loan agreement stipulates:

PT SMI shall not make any Subloans… unless such Qualified Enterprise has at its disposal… adequate working capital, and other resources which are required by such Qualified Enterprise for the carrying out of its Qualified Subproject in respect of which the Subloan is to be made (ADB 2022a: article 3.03).

That most of the funds committed to SDG Indonesia One come in the form of loans, which are then disbursed in the form of subloans, means that ‘the ability of the project to repay is the most important criterion’ (Interview 2 27 October 2021). As noted in our interviews, the ‘risk appetite’ of PT SMI is conservative. As a state-owned business entity it simply cannot finance small-scale projects, which is a challenge for SDG-oriented projects as ‘their bankability is typically low’ (Interview 1 9 October 2021) and ‘not always big scale’ (Interview 3 26 November 2021). The requirement for bankability does not mean social, environmental and governance risks go unaccounted in project development. In 2018, PT SMI instituted a comprehensive risk management framework to measure and manage a whole host of risks, from legal risk and reputational risk to social and environmental risks in an attempt to comprehensively balance risk and return for the company (PT SMI, 2018a). However, ‘all risks are assessed in relation to the potential or possibility of default’ (Interview 2 27 October 2021).

The fact that creditworthiness is a key criterion to access finance supposedly allocated for ‘de-risking’ raises the question of whether, and to what extent, investment opportunities are being ‘de-risked’ in frontier and emerging economies. In the case of the ADB loan to PT SMI for SDG Indonesia One, ‘project development’ is less about building projects than finding already bankable projects to finance. As an interviewee notes, SDG Indonesia One is basically ‘a matchmaking platform to connect investors with relevant projects’ but the difficulty of getting projects that match the risk appetite of both PT SMI and donors means that ‘the number of pipelines is quite small’ (Interview 1 9 October 2021). This is especially because bankability alone is inadequate to attract big finance, it has to be the right scale and ‘what exists today does not respond to the needs of small and medium enterprises or projects’ (Interview 3 26 November 2021).

Just as importantly, it is questionable whether the work to align private finance with the SDGs can accelerate the flow of finance to the implementation of these goals. In SDG Indonesia One, the capital that is unlocked is typically far less than what is pledged by partners, precisely because of the limited availability of the right projects. In 2021, for example, US$ 3.22 billion was pledged to the platform, of which only US$ 230 million was realised (PT SMI, 2021b). This raises the key concern that (re)producing (chains of) debt to finance global goals that aspire to leave no one behind would instead exacerbate inequalities and vulnerabilities, while eclipsing any alternative agenda for reparation and redistribution (Perry, 2021).