Tri Hita Karana FORUM ON BLENDED FINANCE, 13-14 NOVEMBER 2022

Indonesia is leading on climate actions and the SDGs with blended finance to unlock capital for people and planet. Mobilising over $30 billion for just energy transition, sustainable infrastructure and waste management, regenerative food and landuse, oceans, ecotourism, and health. Spearheaded the inclusion of the Global Blended Finance Alliance in the G20 Bali Leaders’ Summit communique to scale and replicate blended finance instruments for the developing countries.

As G20 Presidency, 2022 has been a pivotal year for Indonesia and the world. Amid multidimensional crises driven by conflict, covid, climate change, disruptive food and energy supply, inflation, slowing global economic growth and heightened geo-political tension, Indonesia has successfully released a joint G20 Bali Leaders’ Declaration that strongly supports global climate action, strengthening policies and mobilising financing, technology transfer and capacity building to help developing countries accelerate and scale investment for climate action and the SDGs.

Initiated by the Government of Indonesia, the Global Blended Finance Alliance (GBFA) has won the G20 members’ acknowledgement as an inclusion in the G20 Bali Leaders’ Declaration. The GBFA is envisioned to work in partnership with many stakeholders and interested parties (governmental, philanthropic, and private investors) to stimulate the use of official and philanthropic finance for incentivising private investments for high-impact SDGrelated business solutions. It will also support policy goals of the G20 Blended Finance Principles to scale and replicate blended finance instruments to reduce the cost of investment in Developing Countries, including Least Developed Countries and the Archipelagic Island States; including deepening South-South learning and collaboration.

Extracts from the G20 Bali Leaders’ Declaration on Global Blended Finance Alliance

The G20 Principles To Scale Up Blended Finance #3. Promote optimal operationalization and delivery of blended finance in developing countries, including LDCs and SIDS.

“……….. This includes the support of dedicated global institutions, including Multilateral Development Banks (MDBs) and the role played by philanthropies, to engage a wide set of actors and build a global community of support. We acknowledge the proposed initiative by the Government of Indonesia on the Global Blended Finance Alliance that could serve as a global community of support to accelerate investment in climate action and sustainable development. …….”

The GBFA “Signing/Witness Joint Statement with Non-Government Partners” ceremony was witnessed by Indonesian ministers, H.E. Luhut B. Pandjaitan, Coordinating Minister of Maritime Affairs and Investment, H.E. Siti Nurbaya Bakar, Minister of Environment and Forestry, H.E. Basuki Hadimuljono, Minister of Public Works and Public Housing, and H.E. Syahrul Yasin Limpo, Minister of Agriculture of Indonesia. The Ceremony was participated by international and national organisations including the Green Climate Fund, the OECD, Conservation International, Konservasi Indonesia, the Global Steering

Group, Systemiq, Blended Finance Taskforce, the B-Team, GFANZ, UN SDSN, World Resources Institute, International Chamber of Commerce, United In Diversity Foundation, Pegasus Capital Advisors, ADM Capital, Capcade, PT SMI, BlackRock, Arnold & Porter, the Asian Development Bank, the Khemka Foundation and others.

Coordinating Minister Luhut said “We don’t have time to reinvent the wheel. This is why we are launching the Global Blended Finance Alliance which will build capacity across governments, the private sector and philanthropy to do better blending. The Alliance will be housed right here in Bali and we invite you all to partner with us. We don’t have time to lose if we are going to unlock trillions in investment each year for the planet. We need to do for the next generation, for our grandchildren.”

This was preceded by the “Signing Joint Statement on Tropical Forest Partnership between Indonesia, Brazil and Congo (IBC)” ceremony. The partnership will see the world’s three largest carbon-sink countries working together to negotiate a new sustainable payment mechanisms for preserving the tropical rainforest, protecting million species of plants and animals as well as combating climate change.

Indonesia has consistently demonstrated strong leadership and commitment to climate action.

It has passed the regulatory on the “Economic Value of Carbon” to establish Indonesia’s domestic emissions trading system. It is the only major ‘carbon sink’ country to record a drop in deforestration rate in the last 4 years. In fact, its deforestration rate has fallen 75% to a record low in 2020 since monitoring began in 1990. It is also the first ASEAN country to announce net zero emission by 2060 with international support, a decade earlier than what was planned, and had issued a moratorium on coal power plants development from 2023. Indonesia has increased its NDC commitment under the Paris Agreement from 29% to 31.89% unconditionally and from 41% to 43.2% with international support.

Under the auspices of President Joko Widodo, the Tri Hita Karana Forum –Indonesia’s pre-eminent network of global and local leaders from the tri-sector – held its third Tri Hita Karana Forum Sustainable Development on “Future Knowledge and Blended Finance for Better Business Better World” from 13-18 November 2022 in Bali. The 2-part Forum comprises the Tri Hita Karana Forum on Blended Finance held 13-14 November, and the Tri Hita Karana Future Knowledge Summit held 14-18 November.

The Tri Hita Karana (THK) Forum on Blended Finance has seeded and catalysed over $30 billion worth of pledges, projects and initiatives for the UN Sustainable Development Goals. The areas in which these initiatives largely prioritised are: accelerating investment in Indonesia’s just energy transition; scaling finance for sustainable infrastructure & circular waste management; and mobilising capital for nature-based solutions, especially oceans, forests and regenerative food systems.

In a powerful keynote remarks made by H.E. Siti Nurbaya Bakar, Minister of Environment and Forestry of Indonesia, she said, “…. We are now not just pursuing ambition but also implementation with international support and collaboration with developed and developing countries. All of us must be part of the solution.” She added, “Just this month, Indonesia became the first country in the East Asia Pacific Region to receive an advance payment of US$20.9 million under the Emissions Reduction Payment Agreement between the Government of Indonesia and the World Bank’s Forest Carbon Partnership Facility to reduce emissions from deforestation and forest degradation in the East Kalimantan province… but more than just financial matters, we have the experiences and gain technical know-how to be dealing with the complexities of field and landscape management.”

At the THK Forum, PLN (Indonesia’s state-owned utility) and Amazon announced the agreement for 210 megawatts (MW) of renewable energy across four utility-scale solar projects located in Bali and Java on the Java-Madura-Bali grid. This is the first time a corporate will be able to access utility-scale and new solar projects in Indonesia. Amazon’s commitment to be the off-taker is a key enabler for these projects. PLN plan to introduce more green tariff opportunities for other interested corporates, thereby unlocking more corporate renewable energy procurement options in the country.

Michael Punke, Global Vice President for Public Policy, Amazon Web Services (AWS) added, “We all know that climate challenges cannot be solved in isolation by governments, the private sector, or NGOs. It’s going to take all of us collaborating, sharing ambition and building expertise together. This is why events like this one, and organizations like the Tri Hita Karana Forum, are so important, as they bring together a wide range of stakeholders to share knowledge and best practices to drive collaboration.”

Darmawan Prasodjo, President Director PT. PLN said that “The reason we need to accelerate the transition is because we need to live in a world where cheap energy is clean. And clean energy is cheap.”

Another exciting announcement was the “Blue Halo S” platform with Coordinating Minister, Luhut Pandjaitan, and Minister of Marine Affairs and Fisheries, Sakti Wahyu Trenggono. Blue Halo S is a new model for ocean conservation and fisheries management in Indonesia, and is the first ever integrated marine protection and sustainable fishery management approach designed to fund itself over time. “There is a critical need to conserve ocean ecosystems and biodiversity while building a thriving and more sustainable livelihood opportunities for local communities. Blue Halo S approach serves as a blueprint for enabling these things to thrive together,” said M. Sanjayan, Chief Executive Officer, Conservation International.

The Alliance to End Plastic Waste (AEPW) announced its US$36 million commitment to support Indonesia’s national goals to reduce 70% ocean plastic pollution by 2025 and achieve near zero leakage by 2040. With this commitment, the AEPW will support projects across the archipelago including its flagship programme, Bersih Indonesia: Eliminasi Sampah Plastik, which has started with Phase One in Malang.

The THK Forum Outcome Session on ‘Sustainable Travel & Tourism and Historic Urban Landscapes” co-hosted by Sustainable Tourism Global Center (STGC), revealed a new tourism report from Systemiq and STGC entitled ‘Better Travel & Tourism, Better World’. The report finds that without significant changes the Travel &

Tourism Industry’s emissions will rise 20% by 2030 which is one-third of the total (net zero) global carbon budget of that year, threatening the viability of the industry itself.

H.E. Sandiaga S. Uno, Minister of Tourism and Creative Economy of Indonesia started the session by stating the importance of Travel & Tourism in Indonesia and the world: “Indonesia’s tourism and creative economy is number 32 in the world, up 12 places since the last index. And we are still heading in an exciting direction towards quality, world class sustainable tourism. We are in the right place to discuss this - Bali, the island of the gods.”

The landmark report is the first to identify a fully costed strategy for shifting the Travel & Tourism industry to a net-positive model by 2050. The global reform agenda requires increased investment in transport, facilities, nature and resilience of USD 220-310 billion a year to 2030, equating to 2-3% of the Travel & Tourism Industry’s contribution to annual global GDP of USD 10 trillion. This vital investment will enable the industry to drive strong, sustainable growth, strengthen its resilience, maintain its licence to operate, and remain competitive in the long run.

Former Mexican President and STGC advisor, Felipe Calderon added: “The travel and tourism sector employs 10 per cent of the world’s population and that figure is set to grow by over 120 million in the coming decade. It is vital that it recognizes its responsibilities in working towards net zero and ensuring we preserve the planet for future generations of travellers.”

Dr. Amalia Adiningar Widyasanti, Deputy Minister for Economic Affairs, Ministry of National Development Planning/ Bappenas showcased the Serangan Village which aims to utilise blended financing to develop Historic Urban Landscapes and help unlock the extraordinary potential of sustainable tourism. The UNESCO’s Historical Urban Landscapes program takes a holistic approach in preserving a historical space by integrating the social, cultural and economic asset of a historical site community for sustainable growth. Kura Kura Bali, adjoining to the Serangan village, is a project that is embracing the SDGs in alignment with Balinese culture.

In a parallel THK Forum Outcome Session on “Regenerative Nature, Food and Forestry Business” co-hosted by KADIN Indonesia together with Packard Foundation, the session presented new investable business opportunities in forestry sector, as well as concrete pledges from business community towards investing and implementing in regenerative forestry business. “…Regenerative business is the future, where the forest entrepreneurs will see in regenerative businesses – not just for profit, but also for social and environmental goals” said Soewarso, Deputy General Chairperson for Sustainable Plantation Forest Production, APHI.

With over 20 million hectares of agriculture land, Indonesia has huge potential for regenerative forest business geared toward commodities such as coffee agroforestry, cocoa agroforestry, vanilla, palm sugar, and essential oil. Exposure to market opportunities of regenerative forestry best practices could motivate stakeholders to implement, invest and support this initiative.

The 2022 Ocean 20 (o20) held on 14 November marked the first time an ocean event was held as part of the G20 Summit. Initiated by the government of Indonesia in collaboration with the World Economic Forum, and supported by the THK Forum, the O20 platform aims to bring together world leaders in a shared commitment and ambition to create a heathier ocean and more sustainable marine economy.

The forum dived deep into discussion on sustainable ocean economy growth, blue carbon and blue food, fast-tracking of steering financing into ocean health, as well as addressing plastic pollution, and climate change. The Ocean 20 will be positioned as an official engagement group of the G20.

The THK Forum workshop “Modernising the Development Finance System – Lessons Learned”, co-hosted by the Blended Finance Taskforce with leading blended finance practitioners, focused the discussion on replicating blended finance solutions that already work including (i) the $3bn sustainable infrastructure platform “SDG Indonesia One”; (ii) the ILX Fund, which provides institutional investors access to the development finance asset class by investing in private sector loans of the MBDs and DFIs; (iii) BlackRock’s Climate Finance Partnership for renewable energy and energy efficiency solutions; and (iv) the Global Fund for Coral Reefs managed by Pegasus Capital Advisors with a first loss sleeve from the Green Climate Fund.

The workshop, opened by Luky Alfirman, Director General of Budget Financing and Risk Management, Ministry of Finance Indonesia, also sought input on how the new “Global Blended Finance Alliance” could tackle the main barriers preventing the blended finance market from scaling. Workshop participants strongly welcomed and supported the initiation of the Global Blended Finance Alliance as a platform to share learnings and create a body of best practice. They said the Alliance should partner with leaders and focus on: 1) Blended finance training programmes for public, private, and philanthropic stakeholders on how to structure blended finance deals, 2) Providing support to replicate blended finance transaction that already work, 3) Facilitating matchmaking between projects and investors to reduce transaction costs and accelerate access to catalytic capital, 4) Convene blended finance leaders to share learnings, especially across Global South development finance institutions, and 5) Help increase standardisation and transparency of emerging markets performance data. Leading practitioners present were from the OECD, the Asian Development Bank, the Blended Finance Taskforce, Systemiq, ILX Management, Blackrock, the Green Climate Fund, HSBC, Pegasus Capital Advisors, World Resource Institute, Khemka Foundation and others.

The Tri Hita Karana Forum and the Blended Finance Taskforce will engage closely with partners and friends including GFANZ in 2023 to help define the strategy and impact targets of the Global Blended Finance Alliance.