The use of transition finance will be a cornerstone element needed to drive Southeast Asia's shift from fossil fuels to a sustainable energy future. However, the role, definition, and implementation of transition finance remain complex. This month, SIPET Connect kicks off a "Transition Finance Series" of deep interviews to explore the essential role of financial instruments in advancing the energy transition across Southeast Asia. Each month, for the next five months, we will feature an interview with an expert practitioner, to probe their views on the topic, solicit their suggestions for successful finance strategies, and ask for their candid views on what works, and—frankly—what is holding up progress in the area of transition finance.
This month, we kick off the Transition Finance Series with Putra Adhiguna, a co-founder of the Energy Shift Institute and former Asia Technology Research Lead at the Institute for Energy Economics and Financial Analysis (IEEFA.) Putra brings nearly two decades of leadership experience at the intersection of energy, finance, and policy in Southeast Asia. He has been instrumental in shaping discussions on energy transition strategies in Indonesia and the region. His insights have been featured in prominent outlets such as Straits Times, Bloomberg, and The Wall Street Journal, underscoring his influence in the field. A trusted advisor to corporations, financial institutions, and public officials, Putra combines a deep understanding of Indonesia’s energy landscape with regional expertise, making him uniquely positioned to address the critical role of transition finance in driving Southeast Asia’s sustainable energy future.
In this first installment, Putra talks with Peter du Pont, Senior Advisor to SIPET and Co-CEO of Asia Clean Energy Partners. He shares his perspectives on the unique challenges and opportunities for transition finance in Southeast Asia—highlighting the distinction between green finance and transition finance, the need for setting pragmatic near-term targets for decarbonization, and strategies for advancing energy transitions in Indonesia and the region.
* * * * *
SIPET: Could you introduce the Energy Shift Institute and its focus?
Putra: The Energy Shift Institute is a non-profit think tank dedicated to advancing the energy transition in Southeast Asia. When we set up the Institute, we identified a significant gap in the public discourse: technical experts often have deep knowledge of energy systems but lack the freedom to challenge norms, while activist voices may lack the depth needed to tread the complex subjects.
Our role is to bridge this gap by offering investment-focused, pragmatic discussions that resonate with policymakers and investors. We’re grounded in the realities of the region, focusing on practical solutions that combine technology, policy, and finance to make meaningful progress in the energy transition.
SIPET Connect: Why is finance such a strategic focus for the Institute?
Putra: Southeast Asia's energy transition won’t happen without large-scale capital mobilization, but this is a tricky space to navigate. My co-founder specializes in financial regulation and policies, and together we’ve worked to understand the complexities of aligning capital allocation with decarbonization goals.
Transition finance, in particular, sits at the intersection of emerging technology and riskier investment. It's about more than just funding; it’s about managing technological risk, aligning strategies, and ensuring long-term viability. For example, while green finance might be used to fund straight-forward or proven decarbonization projects, such as renewable energy technologies, transition finance typically involves nuanced investments, like supporting heavy industries in decarbonizing incrementally.
Additionally, Southeast Asia is influenced by East Asia’s economic frameworks, which don’t always align perfectly with local needs, adding another layer of complexity. Ensuring that Southeast Asia’s actual needs are catered to is essential or we risk stalling the energy transition in this region.
SIPET Connect: How would you define “transition finance” in the context of Southeast Asia’s energy landscape, and how does it differ from “green” or “sustainable” finance?
Putra: Transition finance is about supporting emission-intensive companies and sectors in their gradual shift toward sustainability. Unlike green finance, which has clear-cut criteria for funding solar or wind projects, transition finance deals with the “grey area.” It includes funding for industries such as cement or steel that can’t immediately decarbonize but are working towards it.
This is critical in Southeast Asia, where manufacturing, energy production, and other high-emission industries play a significant role in the economy. Transition finance provides support for pathways that improve emissions intensity while ensuring economic resilience. The tricky element to transition finance is figuring out which technology or company is genuinely working towards decarbonization, and therefore, deserving of this pool of capital.
SIPET Connect: What are the biggest challenges in advancing the use of transition finance in Southeast Asia?
Putra: The lack of commonly accepted understanding of transition finance – including regulatory policies and frameworks such as sustainable finance taxonomies – is a major hurdle in advancing its use. Transition finance is still an evolving concept. Without clarity, investors are concerned about greenwashing which has financial and reputational implications. This uncertainty affects confidence and complicates project evaluations, although such projects may get along just fine with regular financing.
A key challenge is that some transition technologies are still too risky today from investment perspective. Until these technologies can prove its worth -both technically and economically- certain transition finance applications may be hard to scale.
Transition finance is often perceived as “less green,” but given its importance, defining its use in a credible manner is essential for its growth.
SIPET Connect: What innovative financing mechanisms do you see as most effective for Southeast Asia’s energy transition?
Putra: Early-stage capital is crucial, particularly for niche projects that larger institutions might overlook. For instance, SEACEF[1] has funded small-scale solar and battery-swapping projects for EVs, which address untapped opportunities in the market.
Distributed renewable generation, like rooftop solar and industrial park-level systems, is another promising area. Distributed energy business models often bypass some of the regulatory challenges tied to state utilities, making them attractive to private investors and easier to scale in fragmented markets like Southeast Asia.
SIPET Connect: Yes, indeed. It does seem that many project developers in the area of clean energy are working outside the regulated utility space. What trends do you see in that area?
Putra: In Indonesia, developers are increasingly focusing on distributed renewable generation, like rooftop solar and industrial parks with independent energy permits. These types of projects provide a more nimble space for growth while sidestepping some of the complex challenges tied to the wider state utilities..
We’re also seeing innovation in urban energy systems, such as EV battery-swapping stations. While these projects still face challenges, their decentralized nature makes them a vital part of Southeast Asia’s transition strategy.
SIPET Connect: How can these mechanisms [pa1] be scaled across sectors effectively?
Putra: Scaling requires both standardization and regional collaboration. Clear guidelines on what constitutes a "transition pathway" help investors evaluate projects consistently. Defining what transition means will need to consider sector-specific situation and based on science and economics, not on ambiguous preferences.
SIPET Connect: How do you balance financial, social, political, and climate goals in financing the energy transition?
Putra: It’s not easy. Climate goals often take precedence, but we can’t ignore the social and political dimensions, such as job creation and community impacts. A good balance often comes through a mix of concessional finance, which reduces risk for private investors with grants to address broader socioeconomic concerns.
For example, industrial decarbonization in Indonesia could include workforce retraining programs alongside the generation of emissions reductions. These initiatives ensure that the benefits of transition finance extend beyond just the environment.
SIPET Connect: Are there examples of concessional finance programs that have successfully accelerated clean energy projects?
Putra: Concessional finance has been instrumental in Southeast Asia, including some solar development projects in Thailand.
There are funds that also target early-stage projects, providing the funding needed to de-risk smaller developers and innovative solutions like battery-swapping for EVs.
The challenge, however, is scalability. These programs need clear long-term strategies to attract follow-on investments and ensure lasting impact. They’re great for kickstarting projects, but without alignment with commercial models, they risk becoming one-off solutions.
SIPET Connect: What lessons can be learned from these concessional finance initiatives? And how can they reduce risks for private investors?
Putra: De-risking is key. Mechanisms like guarantees and first-loss provisions help address private investors’ concerns, particularly in emerging markets. However, these programs must be tailored to local contexts—what works in Vietnam’s solar market might not apply in Indonesia.There are valid concerns that blended finance may have oversold how much private capital that it can actually mobilize, but there are some signs pointing in the right direction.
Flexibility and strong stakeholder engagement are also critical. Programs that adapt to local needs are more likely to succeed in building trust and encouraging private sector participation.
SIPET Connect: What advice would you give to project developers seeking to access transition finance?
Putra: Understand emerging financing frameworks, like those from ICMA[2] or the Climate Bonds Initiative, as they’re shaping the expectations for transition finance. Having a clear, actionable plan with measurable near-term targets is critical—investors want to see results, not just intentions.
Also, it is important for project developers and entrepreneurs to stay adaptable. This space is evolving rapidly, and developers who can respond to changing market dynamics will be better positioned to attract funding.
SIPET Connect: Are you optimistic or pessimistic about the prospects for scaling transition finance in the short term?
Putra: I’m cautiously optimistic. Transition finance isn’t a cure-all—it needs clear definitions and well-designed projects to succeed. Without these, there’s a risk of undermining its credibility.
The key is focusing on near-term targets. Long-term commitments are great, but without measurable progress in the next three to five years, they’ll fall flat. Transition finance needs to deliver real impact to build trust and maintain momentum.
SIPET Connect: Can you share exciting projects or research areas the Energy Shift Institute is working on?
Putra: We’re looking at supply chains for critical minerals, like decarbonizing nickel smelting in Indonesia. Producing “green nickel” for EV batteries is a big challenge, but it’s essential for global decarbonization.
We’re also examining the possibility of transitioning the coal sector in Indonesia. The global narrative that coal is being phased out may have little relevance at market level where major coal producers keep on pushing their production limits. Our research focuses on identifying the pressure points that can drive meaningful change in the sector.
Last but not least, we’re continuing our work in empowering investor voices, by ensuring they are informed of risks and opportunities in emerging technologies and weighing in on important developments in transition finance in the region.
SIPET Connect: Finally, Indonesia recently announced bold energy transition plans at the G20 Summit. What’s your take on these commitments?
Putra: Indonesia’s pledge to phase out fossil fuels in 15 years and add 75 GW of renewables is a huge positive signal, but it’s not without implementation challenges. And right now, Indonesia needs to demonstrate it can be relied on by taking real and meaningful action towards fulfilling the President’s bold plan. Bolder short-term commitments is also key.
The RUPTL[3], Indonesia’s power sector roadmap, has been difficult to rely upon in the past, which raises the urgency to increase its credibility. Labeling the projects listed with their order of priorities can be a good start to build investors’ trust and draw their focus.
Financing will be critical. Redirecting subsidies and securing international support will be necessary to make these commitments a reality. Still, these announcements show that Indonesia recognizes the importance of transitioning—and that’s a step in the right direction.
Financing will be critical. Redirecting subsidies and securing international support will be necessary to make these commitments a reality. Still, these announcements show that Indonesia recognizes the importance of transitioning—and that’s a step in the right direction.