Domestic Capital Mobilization for Climate Finance in Southeast Asia

The report analyzes climate finance flows in Southeast Asia, finding a heavy reliance on international capital despite growing domestic interest. It focuses on Indonesia, the Philippines, and Vietnam, identifying that while corporates are the primary local investors, institutional and financial institutions remain underutilized due to risk perceptions and loan tenor mismatches. The document argues that blended finance—through guarantees, technical assistance, and project aggregation—can catalyze local investment in nature-based solutions, adaptation, and utility-scale renewables.

• Domestic investors in Southeast Asia are significantly underrepresented in blended finance, accounting for only 5% to 6% of total investment commitments, while international and regional investors dominate.
• Local corporations are the most active domestic investors across Indonesia, the Philippines, and Vietnam, but this activity is concentrated among well-capitalized firms and subsidiaries of large conglomerates.
• Vietnam has achieved the highest level of domestic climate finance among the three target countries, largely driven by feed-in tariffs (FITs) that attracted 60% of its climate finance between 2020 and 2022, primarily for solar energy.
• A critical barrier for domestic banks in Indonesia is the mismatch between typical loan tenors (7-8 years) and the requirements for renewable energy and infrastructure projects, which often need 20 years or more.
• The Philippines has been more proactive than Indonesia and Vietnam in catalyzing adaptation financing, with adaptation representing 32% of its total climate financing, compared to 22% in Indonesia and 4% in Vietnam.
• Indonesia's energy transition is hindered by policies that support coal, such as the Domestic Market Obligation, which requires producers to sell coal to the state utility PT PLN at capped prices.
• Blended finance tools, specifically guarantees, are essential for addressing tenor constraints and risk perceptions, as seen with PhilGuarantee in the Philippines and GuarantCo's liquidity extension guarantees in Indonesia.
• Green bonds offer a significant opportunity to mobilize local currency investment, though a mismatch exists in the Philippines where 71% of sustainable debt is in foreign currency despite local investor preference for peso-denominated bonds.
• In Vietnam, the lack of internationally standard Power Purchase Agreement (PPA) terms and the absence of stabilization clauses make non-recourse project financing challenging for domestic and international lenders.
• Nature-based solutions (NbS) and adaptation projects suffer from a 'missing middle'—a gap between proof-of-concept and investment readiness—where projects are too complex for philanthropy but not yet bankable for institutional investors.

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} }