Domestic Capital Mobilization for Climate Finance in Southeast Asia

This report by the Climate Policy Initiative and Convergence analyzes the enabling environment for domestic capital mobilization for climate finance in Indonesia, the Philippines, and Vietnam. It examines the barriers preventing local private investment and the potential for blended finance—using concessional capital to attract commercial investment—to bridge the financing gap for mitigation and adaptation projects.

• Domestic climate finance in Southeast Asia is heavily concentrated in Vietnam and Singapore, while most other countries in the region remain dependent on international capital. In blended climate finance specifically, domestic investors contribute only an average of 6% of investment commitments, with international and regional investors accounting for 66% and 28% respectively.
• Across Indonesia, the Philippines, and Vietnam, corporations are the primary source of local climate investment, often acting as project sponsors in the energy sector. However, this activity is concentrated among well-capitalized firms and subsidiaries of large conglomerates, with limited participation from smaller domestic firms, institutional investors, or domestic financial institutions.
• Climate mitigation receives significantly more funding than adaptation across the three target countries. The Philippines is the most proactive in catalyzing adaptation finance, which accounts for 32% of its total climate financing, compared to 22% in Indonesia and 4% in Vietnam.
• In Indonesia, the energy transition is hindered by policy distortions, such as the Domestic Market Obligation (DMO) which caps coal prices for the state utility PT PLN, and fossil fuel subsidies that have accounted for 9% of government spending over five years. Conversely, Vietnam's high domestic financing levels were driven by feed-in tariffs (FITs) that attracted 60% of its climate finance between 2020 and 2022, primarily into solar energy.
• A critical barrier for domestic banks in Indonesia is the mismatch in loan tenors; while infrastructure and renewable energy projects require tenors of at least 20 years, domestic banks typically offer seven to eight years. Liquidity extension guarantees, such as those from GuarantCo, can help unlock 15–20 year maturities.
• In the Philippines, smaller renewable energy developers struggle to access finance due to low revenue certainty and a lack of balance sheet strength, leading to a reliance on corporate finance (55%) over commercial bank loans (27%). Public guarantees from the Philippines Guarantee Corporation (PhilGuarantee) are used to de-risk lending to these actors.
• Vietnam's climate finance is characterized by a high share of domestic sources (approximately 80% from 2017-2022) and a dominance of balance-sheet equity financing. However, utility-scale projects face constraints due to the absence of internationally standard Power Purchase Agreement (PPA) terms and a lack of government guarantees for payment obligations.
• Blended finance is identified as a key tool for scaling nature-based solutions (NbS) and adaptation by addressing the 'missing middle'—the gap between proof-of-concept and investment readiness. Tools such as project preparation grants, first-loss tranches, and technical assistance are essential for making these projects bankable for institutional investors.
• Green bonds and the implementation of green finance taxonomies are foundational for mobilizing local investment. In Indonesia, faith-based instruments like Green Sukuk and Waqf Sukuk are particularly relevant given that 85% of the population identifies as Muslim.

APA

Bery, A., Sawant, I., Lin, J. J., Byrd, R., & Wijaya, V. (2025). Domestic Capital Mobilization for Climate Finance in Southeast Asia. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/09/Domestic-Capital-Mobilization-for-CF-in-SEA.pdf

Chicago

Bery, Ayesha, Ishwari Sawant, Joyce Jiahui Lin, Rosaly Byrd, and Vivian Wijaya. Domestic Capital Mobilization for Climate Finance in Southeast Asia. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/09/Domestic-Capital-Mobilization-for-CF-in-SEA.pdf.

Wikipedia

{{cite report |last1=Bery |first1=Ayesha |last2=Sawant |first2=Ishwari |last3=Lin |first3=Joyce Jiahui |last4=Byrd |first4=Rosaly |last5=Wijaya |first5=Vivian |title=Domestic Capital Mobilization for Climate Finance in Southeast Asia |publisher=Climate Policy Initiative |date=September 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/09/Domestic-Capital-Mobilization-for-CF-in-SEA.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bery2025domestic, author = {Bery, Ayesha and Sawant, Ishwari and Lin, Joyce Jiahui and Byrd, Rosaly and Wijaya, Vivian}, title = {{Domestic Capital Mobilization for Climate Finance in Southeast Asia}}, institution = {Climate Policy Initiative}, year = {2025}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/09/Domestic-Capital-Mobilization-for-CF-in-SEA.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }