The Determinants of Green Bond Issuance in Indonesia: An Analysis of Sustainable Financial Instruments

Green Bonds (GBs) have emerged as one of the most prominent innovations in sustainable finance instruments in recent times, necessitating an understanding of the factors determining their issuance. However, empirical literature on the factors driving GB issuance in Indonesia is limited. This study aims to investigate the impact of bond characteristics and macroeconomic factors on Government and Corporate Bond issuance from 2018 to 2023 using a random-effects panel regression model. The results confirm that all factors, except economic growth, have a significant effect on GB issuance; however, the impact of some factors differs between government-issued GBs and corporate-issued GBs. Among them, the green stock market and exchange rate have a positive effect on Corporate GB issuance, but the opposite is true for Government GB issuance. Furthermore, increases in interest rates and coupon rates encourage more government GB issuance but have the opposite effect on Corporate GB issuance. Our results contribute to the literature on sustainable finance, providing policymakers, issuers, and investors with valuable practical insights to encourage the development of the green bond market.