As emerging economies expand, the need for sustainable infrastructure in sectors such as energy, transport, and water is increasing. Governments are facing fiscal challenges that make it difficult to meet these investment demands.
Blended finance, which combines public, philanthropic, and private funding sources, is being used to address this gap. By distributing risk and reducing capital costs, blended finance makes it possible to support projects that might otherwise be too risky for commercial investors. This approach helps attract more investment into sustainable development initiatives.
Blended finance works by aligning different types of capital according to their willingness to take on risk and their return expectations. Multilateral organizations and development financiers can take higher-risk positions or invest early in projects, encouraging private investors to participate in emerging markets or new technologies. The effectiveness of blended finance depends on coordination among partners so that each plays an appropriate role.
RTI International has experience applying blended finance in distributed renewable energy projects across Sub-Saharan Africa. In these cases, concessional funds helped off-grid solar companies test business models and demonstrate repayment reliability. Technical assistance improved operations and governance. Once initial success was established, commercial investors joined in, allowing businesses to scale up access to affordable energy.
A similar approach applies to larger infrastructure projects. Blended finance brings together public institutions, development financiers, and private investors who share risks and align incentives. Combining financial tools with technical assistance can help bridge the period between feasibility studies and finalizing project financing.
Indonesia illustrates the urgency of using blended finance for climate-resilient infrastructure investment. Between 2025 and 2029, Indonesia’s infrastructure needs are estimated at IDR 1,905 trillion (USD 117 billion), but available budgets from the government and state-owned enterprises will leave a gap of IDR 753 trillion (USD 47 billion). Addressing this shortfall requires attracting private investment and strengthening institutional capacity.
To support this effort, RTI International partnered with KEMITRAAN – the Partnership for Governance Reform – to organize the Funding Indonesia’s Resilient and Sustainable Transition workshop (FIRST) in Jakarta in August 2025. The event brought together representatives from ministries, state-owned enterprises, development partners, and private investors to discuss how blended finance can speed up climate-resilient infrastructure investments.
Key discussion topics included aligning infrastructure priorities with investor interests; improving project pipeline development; clarifying regulations; showcasing blended finance instruments; providing technical assistance platforms; and defining follow-up actions to increase project readiness.
Participants developed several actions aimed at scaling climate-resilient infrastructure investments across Indonesia:
– Standardizing documentation and procurement processes.
– Institutionalizing risk mitigation mechanisms such as sovereign guarantees.
– Expanding grant funding for feasibility studies paired with local capacity building.
– Launching programmatic delivery initiatives in areas like e-bus corridors.
– Using blended finance facilities for green bonds.
– Deploying digital tools like smart metering for performance monitoring.
– Strengthening subnational capacity through training programs.
These steps are intended to shift Indonesia’s financing ecosystem toward a more integrated model capable of attracting large-scale private capital rather than relying on fragmented investments.
The workshop report provides further details on these recommendations. Attendees marked the occasion by reflecting on challenges and opportunities related to infrastructure financing in Indonesia during the August 21 event.
Looking ahead, RTI International plans continued engagement at events such as the Trellis Conference scheduled for October 28–30, where discussions will focus on how blended finance can support resilient development across emerging economies.
