Introduction
Today, Asia stands at a crossroads of action to confront a USD 2.5 trillion annual financing gap for sustainable development goals. This region bears a disproportionate burden of climate impacts, contributes over 50% of global emissions, and is increasingly hit by extreme weather events. As this year marks the 10th anniversary of the Paris Agreement, this offers a moment not just to reflect, but to accelerate change by scaling blended and innovative finance in Asia. The clock is ticking; urgent action is needed before climate impacts become irreversible. The stakes were made painfully clear in November 2025, when Indonesia, Thailand and Sri Lanka experienced catastrophic flooding due to monsoon storm surges and typhoons, claiming over 900 lives.
On 14 October 2025, AVPN jointly organised an insightful convening together with the World Bank Executive Directors’ Offices for India, Bangladesh, Bhutan, Sri Lanka (EDS12) and the Southeast Asia Group (EDS16) for a roundtable titled “ASPIRE to Scale: Reimagining Development Finance Using Blended and Innovative Finance Tools for Asia’s Economic Growth” at the World Bank–IMF Annual Meetings.
It highlighted the actions needed for institutional and policy reforms, and gathered key perspectives on the urgency, unmet needs, and the mechanics of blended finance, especially in climate resilience and adaptation. This roundtable brought together leaders from government, multilateral development banks, the private sector, and philanthropic institutions with a focus on actionable strategies to reimagine development finance architecture.
Institutional and Policy Reforms: Transformative Role of Multilateral Development Banks (MDBs)
The roundtable pointed out a significant gap in how MDBs currently operate. Many are still fixated on the “orginate-to-hold” mentality, which limits capital mobilisation into new, high impact projects, and often default to minimise risk transfer by prioritising low-risk lending backed by sovereign guarantees.
The need for reform is evident: MDBs need to become “the global master blenders,” taking bolder steps to effectively deploy guarantees, credit enhancement, and first-loss capital to activate greater capital mobilisation.
To succeed, this transformation requires governance and regulatory reform that removes structural barriers. For example, global prudential regulations ought to be reviewed through a development-focused lens, realigning their risk assessments for MDB-backed long-term development assets to reflect their de-risked nature and unlock billions of dollars in investment for the developing world.
Strengthening Local Currency Bond Markets as a De-risk Strategy
Key leaders noted during the discussion that well-developed local currency bond markets can create natural hedges against exchange rate volatility. A strong bond market with sufficient depth and liquidity will enable the absorption of long-term infrastructural debt, reducing risks for large-scale projects.
Domestic development banks have a vital role to play in structuring long-term, locally-hedged financial products. Similarly, national institutions should bundle fragmented projects into large, diversified portfolios, creating the scale necessary for effective blended finance and thereby allowing deployment of MDB guarantees or first-loss layers across investable portfolios.
A Call to Prioritise Adaptation Finance
Discussions also surfaced on the severe constraints on adaptation finance, a critical gap for countries already facing frequent climate shocks. For countries like Bangladesh and the Maldives, a dollar invested in resilience yields could mean seven dollars in avoided losses, making adaptation not charity but survival economics for vulnerable populations.
Therefore, adaptation financing must be prioritised urgently and genuine risk-sharing instruments developed to replace repackaged conventional debt financing for climate adaptation, ensuring we do not add to the debt burdens of developing nations.
Structuring Blended Finance to Unlock Greater Investments
Multiple speakers emphasised that how a deal is structured is often more important than who provides the capital. Even a small amount of catalytic capital like USD 1 million as a first-loss tranche, can unlock larger amounts, such as USD 10 million in mezzanine funding, which can enable mainstream financing.
When first-loss capital is used to absorb that toughest risk, whether political, technological, or early-stage development, it can boost investor confidence. This is why the same climate project, such as making coastal villages more resilient against typhoons, can succeed when blended finance is structured in the right way, even though the project remains the same.
Sector-Specific Priorities Drives Institutional Investors
While many leaders mentioned sector-specific priorities for blended finance due to its benefit to accelerate progress by providing concrete targets for both catalytic and commercial capital, Indonesia’s example on mangroves during its G20 presidency serves as the prime example.
It demonstrated how a single investment can deliver multiple benefits at once: protecting coastlines, supporting wildlife, storing carbon, and supporting local communities, and its specificity provides the justification to attract institutional investors.
The Subnational Opportunity to Engage Proximate Beneficiaries
An interesting perspective emerged about empowering provincial and municipal governments with the capacity and authority to access financing directly. In Tanzania, UNCDF worked with the Tanga utility to structure a USD 1 million guarantee, which successfully unlocked USD 20 million in financing, with 65% subscription from domestic private institutions and insurers. This example shows that local actors can better utilise resources to reach frontline beneficiaries, enabling adaptation through effective service delivery.
On the other hand, ecological fiscal transfers offer another promising model, where central government funds are channelled to local governments based on environmental performance. Carefully designed blended finance can yield unexpected results and incentivise local authorities to improve their ecological metrics and performance in the long run.
What’s Next?
Asia’s long-term resilience is in our hands. This roundtable showcased strong multilateral commitments and leadership, turning ideas and challenges into concrete actions to build a new financial architecture that can channel resources effectively to protect lives and livelihoods and strengthen the resilience of local communities at risk of climate-related natural disasters.
The insights and solutions raised throughout the discussion make a clear statement: closing the USD 2.5 trillion SDG financing gap requires a global effort of partnerships across public, private, and philanthropic sectors to channel resources efficiently and at scale.
In summary, this convening marks the start of a clear pathway toward the 2026 World Bank–IMF Annual Meetings in Bangkok, where ASPIRE aims to secure a landmark commitment to advance Asian-led financing solutions for the SDGs.
If you wish to be involved in this transformational journey with ASPIRE, please let us know via the interest form.
About ASPIRE
The Asia Partnership for Investment into Resilient Economies (ASPIRE) is a multi-stakeholder initiative that seeks to build and activate a coalition of Asian philanthropies, development financial institutions, governments, and private investors to co-create a regionally grounded development finance agenda.
ASPIRE aims to operationalise solutions through three primary levers: policy unlocks, data infrastructure, and platform development. By supporting governments, investors, and intermediaries in building the enabling systems necessary to mobilise blended and innovative finance at scale to Asia, ASPIRE aims to catalyse scalable, people‑centred finance for climate action and the SDGs in Asia.
