Asean Chair, the Philippines, to spearhead regional initiative for enhancing blended finance, as per the announcement by the central bank's sustainability head.

The Philippines, set to assume the ASEAN chairmanship in 2026, is making strides in promoting blended finance among its Southeast Asian neighbours. This approach, which combines public and philanthropic funds to catalyse larger private investments, is seen as increasingly vital as Western aid to the region wanes.

In recent years, traditional official development assistance (ODA) has witnessed a significant decline. The United States, European Union, United Kingdom, France, and Germany have all slashed their aid budgets since 2023. This shift has highlighted the need for innovative financing mechanisms to drive sustainable development in the region.

The central bank of the Philippines, Bangko Sentral ng Pilipinas, is actively working to bolster partnerships on blended finance among ASEAN nations. Asean has already recorded 107 blended finance deals worth over US$20.7 billion, with renewable energy taking the largest share.

Climate Change Commission commissioner Rachel Anne Herrera emphasised the importance of this effort, stating, "The Philippines knows the crisis well. But we also know resilience. We know bayanihan. We know the power of coming together."

The country aims to develop a regional initiative to scale blended finance and promote more investments in forward-looking adaptation projects in Southeast Asia. Key officials from the Marcos administration have called for stronger regional cooperation on blended finance for sustainable development.

Indonesia, the Philippines, and Vietnam have led the region in deal activity, demonstrating the feasibility of such initiatives. Pilot projects such as the floating solar power between Singapore and Indonesia, and the Lao PDR-Thailand-Malaysia-Singapore Power Interconnection, are examples of regional energy trade with political alignment.

The Philippines will be pushing for more regional initiatives on climate and energy finance. One such proposal is the ASEAN Power Grid, a cross-border initiative for exporting offshore wind energy in Southeast Asia. The country could also push to accelerate sustainable bond issuances in the region, partly by lowering issuance costs through blended finance.

By 2026, the Philippines expects to attain upper middle-income status, which will mean less access to concessional loans but boost its creditworthiness. However, this transition comes with challenges. Climate impacts could cut the Philippines' GDP by 7.6% by 2030 and as much as 13.6% by 2040.

President Ferdinand Marcos, Jr pledged that the Philippines' chairmanship will "build on ASEAN's achievements in responding to the region's evolving priorities and in facing emerging challenges." The Philippines will also be leading the development of the Post-2025 ASEAN Strategic Plan on Environment and the ASEAN Blue Economy Implementation Plan.

In her closing keynote, Herrera urged, "The window for opportunity is fast closing. Let us not waste it." With the Philippines at the helm, the region stands on the brink of a transformative era in sustainable development, one that could define the trajectory of Southeast Asia for years to come. Private capital could help fill the gap, with analysts estimating US$4.5 trillion in global private financing waiting for investable opportunities. The Philippines' ASEAN 2026 chairmanship promises to be a pivotal moment in the region's journey towards a sustainable and resilient future.