Funding collaborations, strong leadership, and a sustainable Asian future through green finance.
In a recent interview conducted by Joanna-Luisa Giese on 25 April, 2025, Jessica Cheam, a prominent figure in Asia's sustainability landscape, discussed the importance of blended finance in promoting sustainable development in the Asia-Pacific region.
Cheam's vision for the region in a decade includes political leadership, policy coherence, standardization, and harmonization of sustainable finance. One of the key tools she highlighted was blended finance, a strategy that combines public, philanthropic, and private capital to de-risk investments in sustainable development projects.
Blended finance addresses a significant challenge in investing in developing countries and emerging markets, where the risk profile is not palatable to private capital and investors. It does this by taking the first-loss guarantee, sharing risks, and unlocking capital for private investors to come in.
However, implementing blended finance for sustainable development in the Asia-Pacific region faces several key challenges. One of the most pressing is the limited pipeline of bankable projects. In the region, there is often a lack of adequately prepared projects that are attractive to investors due to insufficient integration of climate and environmental risks into sector strategies and limited data on local vulnerabilities.
To address this challenge, it is proposed to enhance project preparation by integrating climate risks and leveraging innovative financial instruments to make projects more attractive. Another challenge is regulatory uncertainty, with unclear or inconsistent frameworks deterring long-term investment commitments. To mitigate this, developing clear, consistent regulatory frameworks aligned with international standards is crucial to provide stability and confidence for investors.
Institutional capacity gaps, financial and non-financial risks, and scaling up investment are other challenges faced in the region. Strategies to address these include collaboration and coordination, innovative financial instruments, regulatory reform, capacity building, and improving data availability and project preparation.
Recent initiatives such as the JETP (Just Energy Transition Partnership) platform, announced at the G20 summit, and the FAST-P platform, launched in Singapore, are examples of blended finance models aimed at deploying capital into sustainable development projects. The Muara Laboh geothermal power project in West Sumatra, Indonesia, received a US$92.6 million financing agreement, including a US$15 million concessional loan from the Australian Climate Finance Partnership, as an example of concessional blended financing.
Despite the potential of blended finance, its implementation faces challenges. Jessica Cheam believes that blended finance is a key solution to complement a wide range of sustainable finance mechanisms, but its implementation requires careful consideration and collaboration between governments, investors, and philanthropies to align funding types and strategies around shared outcomes.
[1] Source: World Bank Group, 2022 [2] Source: International Finance Corporation, 2023 [3] Source: United Nations Development Programme, 2024 [4] Source: Asian Development Bank, 2024
- Jessica Cheam sees a future for the Asia-Pacific region in a decade, marked by political leadership committing to sustainability, with policy coherence, standardization, and harmonization of sustainable finance.
- Cheam emphasizes blended finance as a crucial strategy to attract private capital to sustainable development projects in developing countries and emerging markets.
- Limited pipelines of bankable projects and insufficient project preparation, with inadequate integration of climate and environmental risks, pose challenges for blended finance implementation in the region.
- To tackle this challenge, Cheam proposes enhancing project preparation by integrating climate risks and leveraging innovative financial instruments.
- Regulatory uncertainties and inconsistencies deter long-term investment commitments, making it essential to develop clear, consistent regulatory frameworks aligned with international standards.
- Institutional capacity gaps, financial and non-financial risks, and scaling up investments remain other pressing challenges, requiring strategies such as collaboration and coordination, innovative financial instruments, regulatory reform, capacity building, and improving data availability.
- Initiatives like the JETP and FAST-P platforms employ blended finance models to deploy capital into sustainable development projects, as demonstrated by the Muara Laboh geothermal power project receiving support from the Australian Climate Finance Partnership.
- Blended finance has the potential to offer a complementary solution alongside other sustainable finance mechanisms, but its implementation demands careful consideration and collaboration between governments, investors, and philanthropies.
- For extensive insights on these topics, references can be found in the 2022 World Bank Group report, 2023 International Finance Corporation report, 2024 United Nations Development Programme report, and 2024 Asian Development Bank report.
