Professor Bambang and many other Asian leaders, brought together through the new Asian Impact Leaders Network, created by social investor network AVPN and the Rockefeller Foundation, are keen to stress that the funding already exists to tackle health inequalities, create jobs for young people and find solutions to the climate crisis. Tristan Ace, chief product officer at AVPN, points out that, in spite of the pandemic, private wealth has continued to grow – worldwide, high net worth individuals held more than US$80tn in 2020. He adds: “Many wealth holders recognise their role in addressing social and economic disparities on the ground.”

But a catalyst is needed to accelerate and direct some of these trillions of dollars to where they can make a positive difference. 

The concept of sustainable finance has gained ground on the world stage in recent years. In 2019, AVPN, with the Rockefeller Foundation and consultancy FSG highlighted in a report, Financing the Future of Asia, “a wave of innovation sweeping across the financial sector” in which investors were using an “ever growing range of instruments to achieve social and environmental benefits, while producing attractive returns”.

“This,” the authors said, “is the exciting field of sustainable finance, and it is growing fast.”

Sustainable finance is a broad field encompassing investments based on environmental, social and governance (ESG) factors, green bonds which are issued to fund environmental improvements, and microloans to the poorest people as pioneered in the 1980s in Bangladesh. Impact investing – investing in businesses that focus on social or environmental goals – has become popular in many parts of the world, with the UK launching the world’s first impact investment wholesaler Big Society Capital, ten years ago.

• Read more: Impact investments worldwide reach $1tn

Some of these approaches, particularly investments with an environmental focus, have really taken off. Global sustainable and responsible investments (including ESG investments and impact investments) reached US$35.3tn in 2020, a growth of 15% in two years, according to the Global Sustainable Investment Alliance. But Professor Bambang has a warning. “Of course there will be a lot of green financing needed in order to achieve environmental sustainability,” he says. “But don’t forget we still have the social sustainability side too. We need to increase the role of financing for social sustainability.” 

He hopes that during Indonesia’s presidency of the G20, followed by India’s presidency next year, more emphasis can be given to the other types of finance that lower and middle income countries really need. He knows that these countries can’t rely solely on public finances. Private investors, he adds, are keen to pursue strong financial returns. “Most will go for environmental sustainability because the business case is quite clear,” he says. “In social sustainability, it is more difficult for private financing to find a business model. So blending private finance with social finance – philanthropy – will be critical.”

And so ‘blended finance’ is the concept that Asian leaders are keen to highlight during the G20. Tristan Ace says: “Blended finance is a huge opportunity for developing countries that isn’t yet being tapped into. It’s about aligning resources in the most effective way to unlock capital.”

“It’s time for blended finance to reach its full potential and meet its promise of attracting private capital into emerging markets at volumes never seen before,” says Joan M Larrea, the CEO of Convergence, the global network for blended finance, pointing to the urgent challenge of meeting the Sustainable Development Goals. 

“The time to scale is now…Blended finance isn’t a silver bullet, it’s a tool, and it’s time we started using it.”

Across the Asia-Pacific region there is a huge amount of expertise in putting blended finance into practice. AVPN is playing a key role in co-ordinating Asian leaders – particularly through its Asian Impact Leaders Network – to submit their experience, research and knowledge to the G20 process.

As this article was published on 23 May 2022, a meeting of the G20 Development Working Group, which focuses on issues affecting developing countries and the SDGs, took place, hosted by the Indonesian Ministry for National Planning (known as Bappenas). The focus of the meeting was how to “scale up blended finance and private finance to reach the last mile”. AVPN highlighted results of a consultation with its members about the role that philanthropy could play in blended finance instruments.

Ibu Vivi Yulaswati is senior adviser to Indonesia’s minister of national development and planning and leads the Development Working Group. Like Professor Bambang, she is a member of the Asian Impact Leaders Network. She explains that a key focus of the group’s work on blended finance is to take the concept forward to its next stage. “Through the G20 Development Working Group, we want to discuss how to create ‘blended finance 2.0’,” she says. This means attracting more private sector finance, developing a widely adopted common framework, and measuring its impact more effectively. 

There is also the opportunity for think tanks and other researchers to submit their thoughts via the G20’s T20 taskforces. Taskforce 9 of the T20 focuses specifically on global co-operation for the financing of the SDGs and its co-chair Abha Thorat-Shah, executive director, social finance, at the British Asian Trust, is currently working through a number of papers bringing in dozens of ideas about how to increase the use of blended finance and other sustainable finance instruments. 

From Thorat-Shah’s point of view, the characteristics of collaboration and innovation that blended finance projects bring are a winning formula.  

One of the outcomes of the 2020 G20 meeting in Italy was a G20 Sustainable Finance Roadmap, and the G20 Sustainable Finance Working Group is taking this forward with the aim of promoting a green and inclusive economy and achieving sustainable development. AVPN will this month provide the group with research into the barriers that its members have faced in their efforts to develop and scale sustainable finance instruments in emerging markets and developing economies. 

AVPN’s annual global event in June brings another opportunity for the blended finance conversation to move forward. It’s an official side event of the G20 and AVPN is the government’s official impact partner. The event will, says Ace, provide a platform for several of the key issues around finance to be discussed. 

Among all the issues fighting for the G20 leaders’ attention, what chance does pushing forward work to support blended finance and sustainable finance have? 

From Thorat-Shah’s point of view, it’s important to be realistic. “For example, if a country like India really embraces blended finance, it could have a huge impact as it can set the benchmarks and good practice for wider adoption and replication,” she says. However, she points out that it’s a long journey: “While India is already starting to do this, for it to become more mainstream, regulatory barriers need to be addressed, projects need to be designed with scale and sustainability in mind, and local governments need to buy into the advantages of these approaches.”

She emphasises that simple, scaleable models should be created to appeal to the private sector. “You need to cut away the over-complicated stuff and be nimble,” she says. 

For Professor Bambang, his ministerial experience means that he knows that a strategic approach is key. He says that the world’s development banks must really get on board. “If we can get their commitment to be the executors, I believe the support of all the members of the G20, especially the advanced economies, will be there,” he says.

What’s more, he adds, a long-term view must be taken. In his role as co-chair of the T20, he says he has already started negotiating with India to ensure that conversations are taken forward during next year’s G20 negotiations. 

“Yes, it’s a slow process,” says Thorat-Shah. “Yes, it’s hard. But, yes, it’s a big opportunity.”

_{Photo credits: ‘Barefoot solar engineer' in India: Abbie Trayler-Smith/Panos Pictures/Department for International Development reproduced under a creative commons licence; Indian students courtesy British Asian Trust}