Indonesia Coral Reef Bond

Indonesia's coral reefs provide essential ecosystem services and economic benefits, generating approximately $3.1 billion annually from tourism, $2.9 billion from fisheries, and $639 million from flood protection. These biodiverse and productive reefs make up 16% of the world's total coral reef area. Additionally, coral reef-associated ecosystems account for 17% of the global blue carbon reservoir, highlighting their critical role in climate change mitigation and the urgent need for their conservation.

Indonesia remains committed to conserve coral reef by protecting around 40% of coral reef and sea grass ecosystem under marine protected areas (MPAs). Effective conservation faces challenges, particularly underfunding, despite coral reef vital contributions to economic growth, social welfare, and climate change mitigation and adaptation.

MPAs in Indonesia require sufficient financial support to safeguard marine biodiversity and sustain their benefits for marine life, local communities, and ecosystems. However, the responsibility of financing coral reef conservation should not rest solely on Indonesia—it is a shared duty of the global community, recognizing the critical role these ecosystems play in environmental stability and sustainability.

The Indonesia Coral Reef Bond is the world’s first outcome bond for MPAs. It aims to improve coral reef health in three target MPAs in Indonesia, delivering independently verified global environmental benefits in 1.9 million hectares of some of the most biodiverse coral reef ecosystems in the world. The project will finance site-based conservation activities to enhance MPA stakeholder engagement in conservation and to reduce priority threats to coral reef habitat. This includes improving intelligence to enhance monitoring, promoting sustainable fishing, improving adherence to zoning requirements and carrying capacity limits, among others.

The project will support the 3 target MPAs in achieving independently verified conservation outcomes in line with the IUCN Green List of Protected and Conserved Areas. The project’s Key Performance Indicator (KPI) is an increase in coral reef fish biomass, a proxy for coral reef health. Healthy coral reefs will generate global benefits of climate mitigation and adaptation and improve resilience of local communities, for example by maintaining fish stocks that underpin livelihoods and food security. The proposed project builds on the government of Indonesia’s broader efforts to improve MPA effectiveness and leverages the US$210 million World Bank-financed Oceans for Prosperity project (LAUTRA).

Coupon payments from the outcome bond will be channelled to the Coral Bond project. The proceeds of the Bond will be retained by the World Bank for its general sustainable development portfolio. Performance-based payments from GEF Non-Grant Instrument (NGI) and from BNP Paribas will be paid to bond investors as Conservation Success Payments according to the level of success achieved in the KPI. The project is innovative in that it channels private finance towards the achievement of global environment benefits. If successful, the project will unlock a new source of capital that can be replicated globally.

In order to introduce the Indonesia Coral Reef Bond, An Innovative Blue Financing for MPA and Coral Reefs, and to encourage partnerships in innovative sustainable financing for MPAs, the Ministry of Marine Affairs and Fisheries, Indonesia in partnership with the World Bank, the Global Environment Facility, BNP Paribas, and IUCN will conduct the side-event at the UN Ocean Conference (UNOC) 3.