The Asian Forest Cooperation Organization (AFoCO) recently hosted a Special Session on Blended Finance as part of the 13th Assembly of the AFoCO Secretariat. The session convened finance experts, corporate leaders, and on-the-ground partners to explore how blended finance can unlock scalable investments for forest and landscape restoration across Asia.
This year’s theme, “Enabling Blended Finance for Forest and Landscape Restoration,” focused on practical pathways to leverage blended finance as a catalyst for inclusive, high-integrity investments in Asia’s forests and landscapes.
The Need for Blended Finance
How can nature-based solutions and forestry projects achieve real impact while remaining financially viable? Traditional public funding, including Official Development Assistance (ODA), is no longer sufficient to meet the scale of investment required. Budgets are stagnant, global priorities are competing, and the level of funding needed exceeds public resources.
Private capital is ready to fill this gap. One speaker highlighted at the Impact for Breakfast in Seoul: Shaping the Future of Sustainable Finance and Family Offices across Asia, that an estimated USD 30 trillion in institutional investors and philanthropic funds will transfer between generations in the coming decade. Increasingly, investors are looking to generate shared value—investing in projects that deliver measurable social, environmental, and economic benefits.
However, from the perspective of investors, forestry projects are often too small, too risky, or too difficult to measure. Blended finance offers a solution. By strategically combining public, private, and philanthropic capital, it can de-risk early-stage projects, attract private sector participation, and mobilize funding aligned with AFoCO Member Countries’ priorities.
Stream 1: Enabling Blended Finance
The first part of the session focused on blended finance mechanisms, bringing together insights from Artha Networks, the European Bank for Reconstruction and Development (EBRD), and Arukah.
Artha Networks highlighted the importance of anchor firms and relationship building with private investors. Continuous engagement with private sector reduces transaction costs and unlocks long-term funding for project development and scaling. Key elements of Arukah’s partnership with AFoCO include:
- Mobilizing private capital to scale AFoCO’s projects.
- Diversifying funding partnerships to reduce risk and drive innovation.
- Supporting AFoCO’s Climate Action Plan 2025–2034.
Investors increasingly seek verifiable, quantifiable impact to justify investments, using systems like Impact Reporting and Investment Standards (IRIS) and Impact Management Project (IMP). For example, an investor would always assess a project based on its risk/reward profile. Investors seek to minimize their transaction costs associated with deal discovery and due diligence. AFoCO can use ODA as catalytic capital, which unlocks the larger amount of follow-on capital, from public capital to private capital, as a starting point. In this sense, ODA and anchor firms can act as catalytic capital to unlock follow-on investment, while digital platforms can help make projects more accessible to global investors.
EBRD presented its Green Economy Transition initiatives in Central Asia. By using blended finance—combining grants and concessional loans—EBRD supports green investments in energy efficiency, renewable energy, resource efficiency, and climate resilience. Their programs particularly focus on enhancing women’s access to green finance and technologies, while building capacity for local financial institutions.
Arukah shared an innovative community-driven biochar model in Southeast Asia. By converting agroforestry residues into biochar, the project can deliver multiple benefits, which include:
- Environmental: Reduces emissions and air pollution, sequesters carbon.
- Economic: Generates income through carbon credits and biofertilizers, with 50% of revenue shared with farmers.
- Social: Improves food security and builds local capacity.
Arukah shared how a proposed pilot plant to AFoCO in Tonle Sap, Cambodia, could reduce 10,000 tCO2e annually and provide year-round income stability for 1,000 farmers, demonstrating how climate action can align with community development.
Stream 2: Field-Ready Solutions
The second stream focused on field-ready solutions, showcasing tangible initiatives where AFoCO is translating blended finance into on-the-ground impact. Experts from Mutual Value Labs (MVL), Mars, and SecondMuse shared lessons from pilot projects and demonstrated how AFoCO can build scalable, investible models across 17 Member Countries.
MVL emphasized creating mutual value for forests, farmers, and communities. By aligning natural, social, and financial capital, MVL helps develop forest-positive economies that are resilient and inclusive. In Southeast Asia, where agriculture-driven deforestation is a key challenge, 80 percent of farmers in frontier regions lack access to fair markets. MVL’s approach addresses this gap by designing business models that integrate community livelihoods with forest conservation, ensuring that environmental impact goes hand-in-hand with economic benefits.
The AFoCO-MVL pilot in Central Sulawesi, Indonesia, demonstrates how these principles work in practice. The pilot—where Mars is an existing buyer—follows a three-step approach:
- Diagnosis: Mapping local economies and drivers of deforestation to identify high-priority interventions.
- Design: Co-creating business and community value models that align supply chains with forest-positive practices.
- Deployment: Mobilizing public and private partners through blended finance, supply agreements, and targeted investments.
This pilot functions as a Living Lab, testing solutions in real landscapes, generating data, and refining models that can be replicated across AFoCO’s Member Countries. By creating a shared learning environment, AFoCO will ensure that lessons from one pilot can inform future projects, reduce costs and accelerate the scaling of forest-positive initiatives.
Mars illustrated how corporates can integrate forest-positive sourcing into their business and financing strategies. By aligning corporate supply chains with sustainability goals, Mars demonstrated that private sector actors can play a pivotal role in financing and supporting restoration projects while achieving business objectives.
SecondMuse further highlighted how blended finance platforms and partnership models can turn early-stage solutions into investible opportunities. Their work focuses on structuring collaborations that attract both public and private capital while ensuring that community benefits are embedded in project design. This approach helps smallholders and local partners meet global market standards and access financing that was previously out of reach.
Through these initiatives, AFoCO is pioneering a comprehensive approach to blended finance—connecting investors, corporates, and local communities to create measurable environmental, social, and financial impact. The combination of Living Labs, corporate partnerships, and platform-based innovation ensures that projects are not only fundable but also scalable and replicable across Asia.
Moving from Ambition to Action
The Special Session at AFoCO’s 13th Assembly showcased how blended finance and private sector engagement can turn big ambitions into real, on-the-ground impact. Participants explored key questions:
- How can public and private capital be structured to attract blended finance?
- How can enterprises and corporates develop market-linked, bankable restoration models?
- How can innovation and technology accelerate sustainable landscape restoration?
Through lively discussions and practical case studies, the session highlighted clear pathways to move from vision to funded, scalable action, strengthening collaboration across AFoCO’s 17 Member Countries and strategic partners.
To keep the momentum going, AFoCO has published its Blended Finance Report for Climate Action Plan 2025-2034—a practical guide packed with insights, real-world examples, and strategies for investors, corporates, and governments who want to make forests and landscapes both profitable and sustainable. If you’re curious about how to turn nature into opportunity while creating lasting impact, this report is a must-read.
Submitted by Somin Oh, Program Officer, Capacity-Building and Evaluation Team