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As Southeast Asian countries accelerate efforts to meet their corporate and national climate targets, Indonesia faces one of the region's most complex challenges: how to finance its transition from fossil fuels—particularly coal—while creating a cleaner, more inclusive energy economy. Transition finance focuses on moving investment from brown (carbon-intensive) infrastructure into green infrastructure, but they should also aim to achieve a transition-phased, equitable shift of the energy sector that creates jobs and development benefits.  

For this edition of SIPET Connect, Peter du Pont, Senior Advisor on the GIZ CASE project, speaks with a leader who is actively shaping the transition finance landscape in Indonesia. Lishia Erza, Chief Executive Officer of Candra Naya Lestari, brings a dual perspective as both a sustainable finance expert and an entrepreneur. She draws on her experience with impact investing, local incubation networks, and public-private platforms to empower communities and small businesses. Deni Gumilang, Sustainable Energy Finance Lead at GIZ, has spent more than a decade advancing climate and energy finance in Indonesia, advising ministries, co-developing policy tools, and supporting the design and development of relevant mechanisms like the derisking facilities for RE that align public and private finance. 

Together, Lishia and Deni offer grounded insights into what transition finance looks like in the Indonesian context—how it’s being applied, what gaps remain, and what it will take to ensure that the country’s energy shift is both just and achievable. 

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SIPET Connect: How do you define transition finance in the Southeast Asian and Indonesian context? 

Lishia Erza: 
For me, transition finance is really about financing the in-between—those activities and stakeholders that might not be part of a company’s direct climate plan but are still deeply impacted by the shift to low-carbon systems. There’s a lot of conversation around emissions, but we often forget the social and economic implications. 

Think about the ecosystem surrounding a coal power plant—transport providers, local small and medium enterprises (SMEs), informal workers. If a power plant shuts down, these people are impacted, yet they often don’t factor into corporate decarbonization strategies. Transition finance should be about making sure those groups aren’t left behind. Another is perhaps the transition of industries to lower emission practices. This often requires significant change management that bears financial impact that are too large to underestimate. 

So, while I don’t directly apply transition finance tools in my current supply chain finance work, I do collaborate with banks and asset managers to design new products and asset classes — for example reskilling loans for women or mechanics who need to shift from traditional to electric vehicle industries, to green agriculture practices and so on. The idea is to help them meaningfully participate in the transition, not just survive it. 

Deni Gumilang: 
Upon entering this domain around 2017, the landscape of transition finance was not as developed in Indonesia than it is at present. At that time, Indonesia remained committed to the development of 35 GW of new power capacity—much of it coal-fired. Subsequently, pressure arising from international commitments under the Paris Climate Agreement, and necessitated a strategic pivot towards renewable energy. That shift, both technically and financially, is complicated. 

GIZ has focused its efforts on assisting the government in aligning its public finance mechanisms with more private finance. Initially, the work primarily focused on the public side—supporting the Ministry of Energy, Ministry of Finance, OJK, and other agencies. But now we are trying to integrate applicable structures that can attract private investment as well. This encompasses the design of financial instruments and helping policymakers comprehend how public and private finance can collaboratively support a pragmatic, yet aspiring, transition. 

SIPET Connect: How are financial institutions in Indonesia responding to these needs, especially around support for what is called a “just transition”? 

Lishia Erza: 
We’re seeing more openness from banks and financial institutions, though it’s still early. The financial products under discussion lately aren’t tied to any specific company. For instance, when a bank considers loans for reskilling, it’s not necessarily connected to one employer laying people off—it’s more about understanding that certain sectors are transitioning and workers across those sectors need support. 

We’re seeing more openness from banks and financial institutions, though it’s still early. The financial products under discussion lately aren’t tied to any specific company. For instance, when a bank considers loans for reskilling, it’s not necessarily connected to one employer laying people off—it’s more about understanding that certain sectors are transitioning and workers across those sectors need support. 

In East Java, for example, a municipality aiming for net-zero by 2045 is working with a local bank to offer financial instruments that help their communities. These might include insurance for livelihood protection, new business loans, or support for upskilling. It’s different from the typical sustainability-linked finance, where the metrics are tied directly to a single company’s environmental, social and governance (ESG) goals. However, while the financial institutions are responding through product offerings, I have yet to see FSPs enabling the people element both on FSP and client side for increase in the uptake.  

Deni Gumilang: 

Our focus at GIZ has been to support the policy and regulatory conditions in Indonesia that enable banks and investors to engage. We participated in the design of the Indonesia Financial Services Authority’s (OJK’s) sustainable finance regulation, a pivotal framework that established the foundation for integrating sustainability objectives into financial products. 

We have also contributed to the development of public finance schemes through the Ministry of Finance—examining mechanisms by which public finance can de-risk private investment. In one example, we analyzed a portfolio of 70 power purchase agreements (PPAs), as part of the government's task to ensure fair energy, working with ADM Capital and separately with PT Sarana Multi Infrastruktur (Persero) as well as USAID, to evaluate their bankability. Such pre-investment support is critically important, given that financial institutions often demonstrate a reluctance to proceed independently without policy backing. 

SIPET Connect: What roles does your organization play in enabling these efforts? 

Lishia Erza: 
Candra Naya Lestari is part of an industrial group with subsidiaries working across precision agriculture, manufacturing, and finance. We play a dual role as intermediary and also as ecosystem players. 

First, through one of our collective movements,  we help municipalities. We’re supporting about 100 local governments in building sustainability strategies in their economies. These aren’t just documents—they’re action plans for net-zero transitions, which often include economic development, workforce shifts, and community engagement. 

Second, through our venture building arm we support a curated network of more than 100 businesses—some are inherently sustainable, others are just starting their transition journeys. We’ve helped mobilize approximately $200 million in capital, some of which goes toward empowering local incubators and accelerators. We also work with investors and financial institutions to identify risks, explore deal mechanics, and target specific sectors that need support. 

Deni Gumilang: 
At GIZ, our strength is in its capacity to construct enabling environments. We provide technical assistance to government institutions—like the Ministry of Energy and Mineral Resources, Ministry of Finance, Ministry of Planning/Bappenas, OJK, etc. We help shape regulations, create analytical modeling tools, and run feasibility studies. These things may not be often visible, but they are essential. 

More recently, through projects like the Sustainable Energy Transition Indonesia (SETI), we are  focusing on the transaction level—helping to move projects from the policy formulation to the financing stage, alongside facilitating matchmaking between donors, government, and developers. Through the PERFORM project, We are actively participating in the Energy Transition Mechanism with MoF and ADB. 

SIPET Connect: What are some of the major gaps or barriers you see in advancing transition finance? 

Lishia Erza: 

There’s a huge awareness and competency gap—especially among businesses. Many of them don’t know where to start. Do they work on EV fleets? Green their facilities? Focus on workforce issues? It’s overwhelming, especially for SMEs. Smaller businesses are still trying to navigate doing business and scaling businesses, whilst catching up with digitalisation now they’re under pressure to keep up with climate issues in business. Smaller companies have very limited resources - money, time, bandwidth, skills.  

At APINDO, the national employers’ association, I chair a committee on inclusive economy and capacity building. We’re now working on a centralized platform—a “center for sustainability and transition”—to give businesses one place to access information, financing, technology options, and policy guidance. Right now, committees from logistics, manufacturing, and transport all come to us with questions. We act as a bridge to GIZ, the International Labour Organization, development partners and technology providers, depending on the issue. 

Deni Gumilang: 
From my observation, the biggest challenge lies in policy coherence within Indonesia's regulatory framework. This framework comprises numerous layers that frequently exhibit misalignment, which often confuses investors and developers.  

Also, our current national strategy, especially in mining and downstream processing, is notably carbon-energy intensive. It might contradict the energy transition goals. Meanwhile, the development of crucial finance tools, such as tax incentives for renewable energy or carbon pricing mechanisms, remains largely questionable. 

At GIZ, we are trying to support more de-risking policies to the situation, as well as designing relevant financial tools like guarantees, mezzanine loans, project development facilities, etc to make investment more attractive. But, the effective implementation of these initiatives necessitates stronger legal backing. 

SIPET Connect: Lishia, what are you seeing in the power sector, particularly around coal phase-out or plant transition efforts? 

Lishia Erza: 
It’s being discussed, but implementation is slow. Companies interested in transitioning—like coal operators—are getting mixed signals from the government. The mechanics of transition deals are still unclear. 

We work closely with the private sector through associations, and a lot of what we hear is uncertainty. Businesses aren’t sure if they should act now or wait. Policy updates sometimes come with little warning or context. 

So at APINDO, we’re creating a platform where businesses can get clarity. We ask them: Do you need to train workers? Talk to funders? Source better tech? We connect them accordingly. The power sector narrative is heavy on the supply and distribution side, but not much on the user side; this is a lopsided conversation between demand and supply side, product and market fit principles are lost. 

SIPET Connect: What about agriculture and nature-based sectors? How do they fit into this conversation? 

Lishia Erza: 
Agriculture is one of the hardest sectors to allocate finance for an energy transition. Most farmers in Indonesia are smallholders—owning less than half a hectare. They’re understandably risk-averse, lack financial documentation, and operate in fragmented markets. 

We try to shift the mindset toward agribusiness. We help farmers think in terms of scaling, documentation, and accessing capital. But even when start-ups come with climate-smart agriculture tech, like AI irrigation or agri-PV, the models often aren’t scalable. Post-harvest is where energy use really spikes—not in the field—so PV investments don’t always make sense unless considered through an integrated economic lens – what crop should be cultivated, what prices can the farm fetch using Agri-PV, what upfront investment and operational costs should farmers consider, and so on. Close to 30% of Indonesia’s workforce work in agriculture sectors – 28% plus. Energy transition conversation should touch the agriculture sector if a third of the country’s workforce is impacted! We’re talking about 40 million people directly or indirectly involved in the transition 

SIPET Connect: And finally, what’s your take on Indonesia’s net-zero targets and the future of transition finance? 

Deni Gumilang: 
Indonesia has officially established a net-zero target for 2060 or sooner, praised the Ministry of Industry expressing an aim for 2050 for industrial sectors. Meanwhile, the progress of the Energy Transition Mechanism (ETM) is also an excellent precedent for achieving early coal plant retirement and leveraging concessional capital, even though its operationalization is still in its discussion phase. More coordination to execute JETP is also critically required among PT Sarana Multi Infrastruktur (Persero) (the Ministry of Finance’s financing vehicle), Perusahaan Listrik Negara (PLN) (the state utility), GoI, and donor entities to achieve greater impact. Concurrently, a strengthening of the legal framework to connect these different dots, particularly about integrating energy regulation and finance, is highly necessary. 

Lishia Erza: 
The good news is we’re finally having the right conversations. Five years ago, nobody was talking about a just transition. Today, banks, municipalities, and national associations are starting to engage. It’s still early—but we’re moving in the right direction, I hope we get there fast enough.  

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Editor’s Note: As Indonesia navigates the complexities of decarbonization, the idea of a just transition—one that supports not only climate goals but also social and economic equity—has taken center stage. This conversation with Lishia Erza highlights a crucial shift: transition finance is no longer just about infrastructure; it's about people, policy, and systems. From enabling financial products that support reskilling, to shaping regulations that de-risk investment, their insights reveal a growing ecosystem of solutions. The road ahead demands deeper policy coherence, greater institutional alignment, and targeted financial innovation—but the momentum is building. 

Reframing the Energy Transition: What Southeast Asia Is Learning from Transition Finance 

As Southeast Asia strives to decarbonize its economies while maintaining economic growth and prioritizing energy security, transition finance has emerged as an essential tool. Transition finance is designed to enable high-emitting sectors to embark on credible pathways toward net zero. It meets companies where they are, not where they should already be. 

SIPET Connect’s Transition Finance Series, which we have run over the past six months, has featured interviews with six leading experts working across finance, policy, and clean energy. The interviews shed light on what this financial instrument means in practice. Drawing from their insights, this article examines how Southeast Asia is defining transition finance, why it is rising in importance, what challenges remain, and what it will take to make transition finance truly impactful. 

What Is Transition Finance—and How Is It Different from Green or Climate Finance? 

As global pressure to decarbonize economies increases, the financial sector is starting to differentiate between various approaches to climate-aligned capital. While green finance focuses on funding clearly defined low-carbon activities, and climate finance often supports mitigation or adaptation in vulnerable regions, transition finance specifically targets carbon-intensive sectors and helps them move toward net zero through credible, science-based plans.  

Melissa Brown, Director at Daobridge Capital, explained that “Transition Finance was born out of necessity—to fill the gap left by green finance for economies that need incremental steps, not leaps.” Unlike green finance, which is typically project-based and emphasizes low-emission investments, transition finance focuses on companies and sectors that remain carbon-intensive but are committed to time-bound decarbonization strategies. 

Jason Lee, Head of Sustainability at CIMB Thai Bank, described transition finance as a dual-pronged approach: managing emissions within financial portfolios while supporting real-economy clients through their transition. “It’s about helping companies move from where they are to where they need to be,” he said. 

Instruments such as sustainability-linked loans (SLLs) and transition bonds are gaining traction in the region. These allow flexibility in the use of proceeds, provided that borrowers commit to measurable emissions or energy efficiency improvements. These loans (SLLs) are typically governed by standards like the GHG Protocol and the ISSB’s IFRS S2.1 

Why Transition Finance Is Gaining Ground 

The interviews revealed a shared understanding that transition finance plays a vital role in the global decarbonization effort. In Southeast Asia, where fossil fuels continue to dominate energy supply and industrial activities, achieving a successful transition requires more than just green finance. 

“We can’t ignore large, high-emitting companies if we want a real energy transition,” said Sarinee Achavanuntakul, Managing Director of Climate Finance Network Thailand (CFNT) “We need to create financial tools tailored for established players in sectors like energy, transport, and heavy industry—not just for startups and new green ventures.” Transition finance enables these firms to retire carbon-intensive assets, invest in cleaner technologies, and realign with national decarbonization goals. 

This approach recognizes that most companies in heavy industry cannot “go green” overnight. “It’s not just about financing projects but fostering partnerships where both parties are committed to meaningful environmental outcomes,” said Jason Lee. Anouj Mehta, Director of ADB’s Thailand Resident Mission added, “Transition finance offers a powerful way to integrate commercial and development finance at scale.” 

Ultimately, the appeal of transition finance lies in its pragmatism. It accepts that change takes time but demands accountability along the way. By offering a flexible yet disciplined framework, it allows Southeast Asia to pursue decarbonization without sidelining the economic realities of its most critical sectors. 

Challenges and Lessons Learned 

A key challenge is credibility. Putra Adhiguna, Managing Director at Energy Shift Institute, cautioned, “We see a lot of transition plans that don’t align with emissions realities or lack transparency.” He emphasized the need for robust, independently verified plans with clear trajectories, milestones, and capital strategies. 

Tailored solutions are also essential. What works in Thailand may not work in Indonesia or Vietnam. Financial products must reflect each country’s energy mix, policies, and industrial structure. 

While blended finance can help de-risk investments, it isn’t a universal fix. Melissa Brown observed, “Concessional capital can help mitigate project risks, but providers need assurance that execution risks can be properly managed and priced.” 

Deni Gumilang, Sustainable Energy Finance Lead at GIZ Indonesia, emphasized the role of public finance in attracting private capital: “We are trying to integrate applicable structures that can attract private investment… mechanisms by which public finance can de-risk private investment are essential.” He noted that while blended approaches are gaining ground, policy coherence and regulatory clarity remain key barriers to scale. 

Regulatory uncertainty adds complexity. Frameworks for taxonomies, carbon pricing, and disclosure remain in development. Several of the interviewees called on governments to move faster to match investor expectations. 

Sarinee highlighted political realities: “You cannot depoliticize transition finance. In regions where fossil fuels are tied to state revenues or elite interests, credible plans must navigate entrenched systems.”  

Capacity and data deficiencies continue to pose challenges. Many companies lack the internal expertise to develop credible transition plans or monitor financed emissions. Lishia Erza, CEO of Candra Naya Lestari, stressed the importance of involving micro, small, and medium-sized enterprises (MSMEs) and local communities: “Finance must shift away from top-down models and support those most affected by climate impacts.” 

Where Do We Go from Here? 

The path forward for transition finance in Southeast Asia is clear yet challenging. 

First, the region must transition from one-off pilot projects to scalable, institutional financial strategies. This involves defining what “credible transition” means at the country level, aligning it with Nationally Determined Contributions (NDCs), and creating taxonomies that reflect regional realities. As Anouj Mehta noted, “DFIs are essential in creating viable financing structures that balance risk and return… [they] could try and mobilize concessional finance, provide risk guarantees, and technical assistance to make these projects bankable.” This kind of support is crucial for de-risking first-mover projects and building national transition finance frameworks that can attract both domestic and international capital.  

Second, financial institutions should invest in internal capacity—not only in risk analysis but also in helping clients navigate transition pathways. This is particularly crucial for MSMEs and mid-sized firms, many of which lack the technical expertise to develop and implement transition plans. “Offering guidance on taxonomies or bond principles builds trust and long-term value,” said Jason Lee. 

Third, alignment of policy and regulatory frameworks will be vital. Enabling frameworks for carbon pricing and mandatory disclosure must keep pace with market innovation. Melissa Brown highlighted that global narratives are evolving, and Southeast Asia must “break away from the one-size-fits-all playbook” to create market-appropriate solutions. 

Lishia Erza added that supporting a just and inclusive transition requires more than just financial flows. “We need hands-on technical assistance and community-level engagement to make these plans real,” she stated. “Otherwise, transition finance risks reinforcing existing inequalities rather than alleviating them.” 

Finally, Southeast Asia requires more regional platforms for peer learning and innovation. As Putra Adhiguna observed, the transition “requires as much cooperation and trust-building as it does capital.” Regional coalitions and open-data tools, like the Southeast Asia Information Platform for the Energy Transition (SIPET), can enhance transparency and coordination.  

Conclusion 

Transition finance offers Southeast Asia a pragmatic pathway to decarbonize from within, rather than around, its economies. The insights from these six interviews suggest that the region is ready to lead—not by replicating models from the Global North, but by designing its own future, anchored in credibility, inclusion, innovation, and peer-to-peer learning. 

Explore the Interviews: 

Putra Adhiguna, Energy Shift Institute – November 2024 

Jason Lee, CIMB Thai – December 2024 

Melissa Brown, Daobridge Capital – January 2025 

Sarinee Achavanuntakul, Climate Finance Network Thailand (CFNT) - February 2025

Anouj Mehta, ADB – March 2025  

Lishia Erza, Candra Naya Lestari and Deni Gumilang, GIZ Indonesia – June 2025 

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