AIIB, KfW expand Indonesia climate financing partnership

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AIIB, KfW expand Indonesia climate financing

Highlights

AIIB and KfW signed an agreement in Bangkok to expand coordinated financing for Indonesia’s Climate Adaptation and Green Resilient Program, Sub-Program 1.
Under CARE CPBF Sub-Program 1, AIIB is providing $500 million in policy-based financing while KfW targets 300 million euros for institutional reforms.
The partnership aims to accelerate Indonesia’s climate policy reforms, mobilize climate-resilient investment, and leverage KfW’s technical expertise in forest protection.

Coordinated financing for reform program

As reported by AIIB, the Asian Infrastructure Investment Bank and Germany’s KfW Development Bank have agreed to deepen cooperation on Indonesia’s Climate Adaptation and Green Resilient Program, Sub-Program 1. The memorandum of understanding was signed in Bangkok on the sidelines of the 2026 IMF and World Bank Group Annual Meetings by Ludger Schuknecht, AIIB vice president for policy and strategy, and Brigitte Réthier, member of KfW’s executive board.

The agreement creates a framework for both institutions to coordinate their engagement with the Government of Indonesia. The program supports policy and institutional reforms spanning climate-smart agriculture, irrigation management, village financing, social forestry, mangrove protection, environmental management, ecosystem services, climate-resilient subnational financing, solid waste management and water supply.

Under CARE CPBF Sub-Program 1, AIIB is providing U.S.$500 million in policy-based financing, while KfW aims to provide 300 million euros. Indonesia’s Ministry of National Development Planning, Bappenas, is coordinating the program, while the government is leading the design and implementation of the reforms with support from both lenders through policy dialogue, technical assistance and coordinated financing.

Support for Indonesia’s resilience investment pipeline

Schuknecht says the partnership combines the two banks’ complementary strengths to support Indonesia’s climate policy reform agenda and accelerate implementation of critical measures. He adds that the cooperation is intended to help mobilize investment while drawing on KfW’s country experience and technical expertise.

Réthier says the reforms are expected to help create a more enabling environment for climate-resilient investment and ecosystem protection in Indonesia. She says KfW is contributing experience from forest protection projects in the country, while framing the partnership as part of a broader response by development banks to climate change and other global challenges.

In our earlier article on Mario Draghi’s warning about the policy dilemma of tight monetary conditions, we discussed how fighting inflation and stabilizing debt can end up constraining the structural investment economies need for long-term growth and resilience. The piece highlighted his argument that central banks should keep rates no higher than necessary for price stability, while governments pursue complementary measures to support productivity-enhancing investment and reduce vulnerability to future shocks.

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