As the world’s largest archipelago, Indonesia is prone to rising sea levels which, in turn, renders it vulnerable to the adverse impacts of climate change. This particularly affects marginalized communities greatly exposed to the resulting economic and environmental harms, but with very limited access to climate finance. This denotes a weakness in the country’s top-down climate finance approach through bilateral and multilateral cooperation that tends to place the financiers’ funding requirements above local needs.

This report, developed in partnership with Hivos Indonesia, aims to assess the current climate finance landscape in Indonesia and explore possible ways in which climate finance can be mobilized to target the marginalized populations. The analysis herein focuses on assessing financing solutions in the three major funding sources — public, private, and philanthropy —along with recommendations of potential enablers to mobilize multiple fund sources and create impacts at scale.

Below are key takeaways that policymakers, financiers, and other stakeholders need to consider in order to design and implement an inclusive climate finance for Indonesia.

• There needs to be an improved understanding of the structural barriers constraining access to climate finance by marginalized groups. Catalyzing an inclusive climate finance means dealing with both the common and the specific barriers unique to marginalized groups. To overcome the barriers of inadequate capacity, public policy, and finance appetite, a more strategic approach is needed to mobilize funds and track their impacts among the marginalized populations.
• Enablers are needed to shift the current financing trends for vulnerable groups from philanthropic finance to more commercial finance, to ensure increase in quantity and coverage. Public and private capital, together, can scale up positive impacts to the environment and society. Deploying a blended finance approach can be the solution to achieving a truly inclusive climate finance.
• Potential enablers need to address the existing barriers of low-quality project pipelines, regulatory uncertainty and unfavourable policy environment, as well as information misalignment.