Just Energy Finance Requires More than Mobilizing Capital: Insights from South Africa and Indonesia

Three strategic levers emerged during the dialogue, as summarized by the Director of Sustainable Energy Hub at UNDP: 

1. Innovative financing is vital to unlock capital and de-risk investments, as demonstrated by examples like Indonesia’s Green Sukuk, a sovereign sustainability bond that mobilized over US $1 billion. 
2. Strong political will and regulatory support prove essential to attract private capital, implement reforms, and ensure that financing flows towards impactful, equitable outcomes—with South Africa recognized as a global leader in this approach. 
3. Leveraging partnerships for greater impact, such as the JETP model, which serve as blueprints for unlocking capital at scale and directing it towards socially inclusive and sustainable outcomes, going beyond financial arrangements.

Indonesia’s experience in implementing its JETP since 2023 highlights the importance of early project preparation. The Deputy Head of JETP Indonesia emphasized that countries must build a pipeline of investable projects before signing financing agreements, as financing offered by international partners is diverse and scattered across different modalities, making it challenging to match with projects that are not prepared in advance. She also highlighted the need for countries to retain sufficient negotiating space with international financing partners to ensure financing terms are suited to national contexts. 

To ensure that energy financing leaves no one behind, Indonesia put in place a Just Transition Framework for financiers in 2024. Grounded in internationally recognised principles, the framework provides eight standards covering areas such as cultural heritage, labour conditions, climate change, and resource management. To further promote economic diversification and transformation, a nineth standard was introduced to ensure local communities benefit meaningfully from energy transition projects. The JETP Secretariat actively engages financiers to adopt these standards, while acknowledging that some project developers or owners may hesitate to apply them due to potential cost implications.

South Africa developed a US $100 billion investment plan to support its energy transition between 2023 and 2027. Although international partners have pledged US $13.7 billion to support this effort, so far disbursements have been slow to materialise, as noted during the dialogue by a JETP Funding Platform Analyst. To address this, the JETP Unit in South Africa created a funding platform to match projects with appropriate funders and accelerate disbursements, especially for concessional loans, which have been slow to flow due to institutional constraints in large-scale energy infrastructure projects. 

While grants are the instrument most used, their volume remains relatively small. Yet they play a critical role in de-risking projects, supporting inclusion, and unlocking other forms of capital. To date, 21 projects have been accepted.