Indonesia is establishing an innovative climate fund initiative to attract public and private investors and close a multi-billion dollar finance gap to help ramp up efforts to cut greenhouse gas emissions, protect forests and boost its green economy.
The Climate Resilience Fund (CRF) “DINFRA” initiative was presented at the “Dissemination of Cross-Sectoral Innovative Climate Financing Opportunities (DINFRA) Climate Resilience Fund (CRF)” event attended by senior government officials, the UN Resident Coordinator Indonesia, donor countries, private sector officials, impact investors, and civil society groups in the Indonesian capital Jakarta on 5 May 2025. The project is supported by the UN Environment Programme (UNEP), who will provide technical assistance and capacity building, under the UN-REDD Programme.
The CRF “DINFRA” will strategically target institutional and individual investors, including insurance companies, pension funds, public entities, philanthropic foundations, venture capital firms, and retail investors. The guarantor role is vital to attract responsible investment, fostering confidence and enabling risk-sharing mechanisms aligned with sustainable development goals.
The United Nations Capital Development Fund (UNCDF) will act as a guarantor, while PT. BRI Manajemen Investasi, an Indonesian investment management company and a subsidiary of state-owned bank PT. Bank Rakyat Indonesia (Persero) Tbk, will be the asset manager.
Indonesia faces significant climate change impacts, including rising sea levels, extreme weather, and biodiversity loss, particularly in vulnerable coastal zones like Sumatra, Java, and forest areas in Sumatera, Kalimantan and Papua.
But the funding needed for the South-east Asian country to tackle these climate challenges is lacking, with less than 10 per cent secured of what is needed - totaling just IDR 19.6 trillion.
Here are the details:
WHAT ARE INDONESIA’S CLIMATE GOALS?
Home to the world’s third-largest tropical forest and highly vulnerable to climate impacts, Indonesia aims to reduce greenhouse gas emissions by 31.89 per cent through national efforts – against the business-as-usual scenario - and by 43.20 per cent with international support by 2030. The sprawling and nature-rich archipelago is currently accelerating efforts to meet its Enhanced Nationally Determined Contributions under the Paris Agreement. The country is also a signatory of the Glasgow Forest Declaration which aims to halt and reverse forest loss and land degradation by 2030.
The land-use and forestry sector is central to Indonesia’s targets, anchored by frameworks such as the FOLU Net Sink 2030 and the Safeguard Information System for REDD+. Under the FOLU Net Sink Plan, the sector will be a net sink of 140 million tonnes of CO2 by 2030. This target, coupled with the forecast emissions from the FOLU sector - 216 million tonnes CO2 by 2030 – is an increase in FOLU ambition of 356 million tonnes of CO2 embedded in the country’s Long-Term Low-Carbon and Climate Resilience Strategy 2050, known as the Low-Carbon Compatible with Paris scenario. However, achieving these targets requires significant financial investments.
But the climate finance gap remains a pressing challenge, as existing funding channels are insufficient to meet the sector's needs to help Indonesia achieve its climate goals. Innovative financial solutions are urgently required to support businesses within the FOLU sector and ensure the successful implementation of Indonesia’s climate commitments.
WHAT IS THE CRF “DINFRA”?
Since 2023, UNEP has been working with the Indonesian Environment Fund (BPDLH), and private sector and development partners to raise capacity, and support environmental, social and governance (ESG) elements of the CRF “DINFRA”. It is an investment fund established under a Financial Services Authority Regulation and registered with Indonesia’s Financial Services Authority.
CRF “DINFRA” is structured to pool capital from investors and managed by a licensed investment manager, to support infrastructure project financing across Indonesia. To broaden its impact beyond traditional infrastructure, the fund has been introduced as a government-led initiative. It is designed to mobilize private sector investment for financing Nature-based Solutions (NbS), thereby playing a significant role in supporting Indonesia’s achievement of its Nationally Determined Contributions (NDC) under the Paris Agreement.
The private sector is anticipated to be a key player, contributing through various financial products and sources such as grants, green bonds, loans, private equity, and corporate social responsibility programs.
By aligning with international standards and leveraging government incentives, the CRF “DINFRA” not only meets Indonesia’s regulatory requirements but will also attract further international support, setting a precedent for sustainable development and climate action across the South-east Asian country.
Specifically, the fund will finance activities such as reforestation, mangrove restoration and wetland conservation. Such initiatives are crucial for enhancing biodiversity and strengthening natural barriers against climate impacts.
HOW CAN THE CRF “DINFRA” AID INDONESIA’S NDC TARGETS?
Indonesia is accelerating efforts to meet its Enhanced Nationally Determined Contributions (ENDCs) under the Paris Agreement. These climate goals include a target to achieve net-zero emissions by 2060 or sooner, restore 2 million hectares of peatlands and rehabilitate 12 million hectares of degraded lands by 2030. The energy, agriculture and forestry sectors will be a key focus.
The CRF “DINFRA” project aims to mobilize private sector investments to finance nature-based solutions (NbS), which includes activities such as reforestation, mangrove restoration and wetland conservation, to significantly support Indonesia’s NDC targets. The CRF “DINFRA” initiative is expected to contribute to a minimum reduction of 128 million tonnes of CO2 equivalent by 2030 from reforestation, mangrove restoration, and rehabilitation of degraded land.
More widely, many countries across Asia Pacific will now look to Indonesia and the CRF “DINFRA” as a pioneering innovative model to finance NDC implementation, especially in the agriculture, forestry and other land use sector.
WHY ARE NATURE-BASED SOLUTIONS SO VITAL FOR INDONESIA?
Nature-based solutions (NbS) include critical activities such as forest conservation and reforestation, mangrove restoration, and watershed management. Such initiatives are vital for enhancing carbon sequestration, thereby mitigating climate change, specifically, reforestation and mangrove restoration projects. For example, a 30,000-hectare area will sequester approximately 500,000 tonnes of CO2 equivalent by 2030, significantly contributing to Indonesia’s carbon reduction targets. Additionally, these projects will support biodiversity by creating and maintaining habitats for various species, with the goal of rehabilitating over 10,000 hectares of degraded land, crucial for preserving Indonesia’s rich biodiversity.
Economic benefits from these NbS projects include generating carbon credits worth an estimated USD 15 million in five to 10 years, which can be traded on international markets, providing a substantial financial incentive.
The development of eco-tourism is also projected to attract approximately 5,000 visitors annually, which will generate significant income for local communities, contributing to sustainable economic development. This influx of tourists is expected to generate around USD 300,000 annually in revenue, supporting local businesses and infrastructure.
Furthermore, the sustainable harvesting of non-timber forest products (NTFPs) is expected to provide livelihoods for around 3,000 local community members, promoting economic stability and social well-being. It is estimated that NTFPs can generate an additional USD 600,000 in income annually for these communities.
WHAT HAPPENS NEXT?
Between 2025 and 2026, implementation of nature-based solutions (NbS), such as forest conservation, reforestation, mangrove restoration, and watershed management projects will commence. Capacity-building initiatives will train local communities and stakeholders.
Between 2027 and 2028, the CRF “DINFRA” will scale up these projects, with ongoing monitoring and evaluation to ensure optimal outcomes and increased community engagement. From 2029 to 2030, the focus will shift to finalizing all activities, ensuring sustainability, conducting comprehensive impact assessments, and sharing results with stakeholders, investors, and the public.
The CRF “DINFRA” is a crucial initiative designed to tackle Indonesia’s environmental and socio-economic issues, particularly those intensified by climate change. By strategically investing in nature-based solutions, the CRF “DINFRA” aims to bolster biodiversity, decrease greenhouse gas emissions, and create sustainable economic opportunities for local communities. Finance solutions and the crucial role of Indigenous Peoples and local communities in conservation are expected to be key focus areas at the COP30 summit in the Amazonian city of Belem, Brazil later this year. The CRF “DINFRA” is a good example of a finance solution that could be part of any future funding roadmap.
With an initial allocation of USD 83 million, the fund is projected to yield a return of USD 160 million over a period of five to ten years, primarily through carbon credits and eco-tourism.
The fund’s comprehensive approach encompasses extensive stakeholder engagement, thorough project planning, and strict adherence to regulatory standards, ensuring its success and alignment with Indonesia’s climate resilience and sustainable development objectives.
