Cost of Capital and Climate Risk in the Indonesian Bonds Market

Authors

Maulana Harris Harris Muhajir, NEOMA Business School, FranceFollow

Document Type

Call for Paper

Abstract

This study analyzes the impact of climate risk, cost of capital, and macroeconomic variables on the Indonesian bond market, focusing on non-ESG aware and ESG-aware bonds. Using a regression analysis, we found that the cost of capital has a significant negative effect on bond yields, highlighting the importance of policymakers focusing on initiatives that can lower the cost of capital for investors. Inflation rate was also found to have a significant positive effect on non-ESG aware bonds, which is a unique feature of the Indonesian bond market. We found that ESG-aware bond yields were negatively significant, indicating that investors are increasingly considering environmental and social values when making investment decisions. Additionally, macroeconomic variables did not show a significant impact on ESG-aware bonds. Our study provides valuable insights for policymakers and investors on how to navigate the Indonesian bond market and implement strategies that align with environmental and social values

Recommended Citation

Muhajir, Maulana Harris Harris (2024) "Cost of Capital and Climate Risk in the Indonesian Bonds Market," Bulletin of Monetary Economics and Banking: Vol. 27: No. 0, Article 6.
DOI: https://doi.org/10.59091/2460-9196.2163
Available at: https://bulletin.bmeb-bi.org/bmeb/vol27/iss0/6

First Page

75

Last Page

94

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

France

Affiliation

NEOMA Business School