Despite strong government commitment through national plans, sectoral roadmaps, and international initiatives, a significant share of climate‑ and development‑aligned projects remain unfinanced. High upfront capital costs, long development timelines, technology and policy risks, currency and offtake risks, and limited project preparation capacity continue to undermine project bankability, particularly for early‑stage and transition projects. Conventional public finance and commercial bank lending alone are insufficient to address these barriers, leaving much of the project pipeline delayed or unable to reach financial close.

Trust Funds as a strategic financing solution

To overcome these challenges, the Government of Indonesia is developing a policy and regulatory framework to enable Trust Funds as dedicated financing vehicles. These Trust Funds are intended to mobilise concessional catalytic capital, blend public and private finance, and deploy targeted de‑risking mechanisms to unlock private investment in priority sectors.

While the regulation is still being finalised, PT Sarana Multi Infrastruktur (PT SMI), Indonesia’s state‑owned development finance institution, has taken an early step by designing the structure and financing schemes for a PT SMI Development Trust Fund. The Development Trust Fund is intended to support early‑stage, transition, and priority infrastructure projects with high development and climate impact, particularly where projects are not yet bankable.

Advancing from concept to implementation

On 23 April 2026, the Green Finance Institute (GFI), in collaboration with PT SMI and the Ministry of Finance, convened a high‑level forum in Jakarta to advance the establishment of the Development Trust Fund and position it as a core component of Indonesia’s sustainable finance architecture. The forum brought together senior representatives from government, regulators, donors, development finance institutions, investors, and research organisations, and was moderated by Poppy Ismalina, Director for Indonesia at GFI.

Key contributions from the Ministry of Finance, PT SMI, and GFI highlighted Indonesia’s climate finance gap and the need to mobilise private capital at scale. A major milestone underscored during the discussion was the Ministry of Finance’s active development of a dedicated regulatory framework for Trust Funds, which will provide legal clarity on governance, fiduciary arrangements, and innovative fund structures.

Designing a catalytic financing platform

PT SMI presented the Development Trust Fund as a strategic platform to consolidate fragmented financing flows, enable capital recycling, and bridge upstream and downstream financing gaps. The proposed design emphasises strong governance, donor protection, and accountability, while supporting projects that are not yet ready for commercial financing.

The Development Trust Fund is key exemplar of the Green Finance Institute’s Transactions to Transitions (T2T) framework, which recognises that achieving transition outcomes requires coordinated action across policy, capital design, risk allocation, and delivery, rather than relying on isolated projects or one‑off transactions.

Through its T2T approach, GFI supports shaping the Trust Fund as a catalytic platform linking upstream project development with downstream capital markets capable of crowding in private investment over time. This includes the use of grants, concessional capital, and guarantees, combined with targeted policy support and strengthened project preparation. A phased approach was emphasised, starting with concessional capital to build pipelines and investor confidence, followed by scaling to attract institutional and commercial investors.

Next steps

The forum convened a broad coalition of international partners, including representatives from the UK Government, Australian Government, European Union, World Bank, ADB, JICA, Japan Bank for International Cooperation, KfW, GIZ, GGGI, Climate and Land Use Alliance, Indonesia Impact Alliance, AVPN, Impact Investment Exchange, CPI Indonesia, and the Tony Blair Institute. Participants aligned on the need for a structured and scalable financing platform, recognising PT SMI as a credible institutional anchor.

Discussions highlighted several critical success factors, including robust governance and safeguards, legal and regulatory clarity, operational simplicity, and sufficient flexibility to meet donor and investor requirements.

The Development Trust Fund is expected to play a role beyond capital provision by combining de‑risking, policy alignment, and upstream support to unlock private investment at scale. The forum marked an important step in moving from concept to implementation. Next steps will focus on finalising the regulatory framework, strengthening operational design, deepening partner engagement, and building a pipeline of investment‑ready projects capable of delivering long‑term development and climate impact.