Cleaner Air has Economic Value. Why is it Still Hard to Finance?
Despite clear health and economic benefits, air pollution reduction projects often struggle to attract financing because their public value does not easily translate into predictable cash flows.
Authors:
Sabilly Royan, Meidina Amarsa and Salsabila Thanesya
July 15, 2026
Clean air is an urgent issue in Indonesia, not only a public health one, but also a business, productivity, and investment one. Four of the ten most prevalent diseases in Indonesia are respiratory illnesses associated with air pollution. Between 2018 and 2022, public health spending on respiratory diseases reached a significant level and showed an increasing trend each year. Pneumonia accounted for approximately IDR 8.7 trillion in healthcare costs, followed by chronic obstructive pulmonary disease (COPD) at IDR 1.8 trillion, asthma at IDR 1.4 trillion, and lung cancer at IDR 766 billion (Ministry of Health of the Republic of Indonesia, 2023).
Beyond direct healthcare costs, air pollution also causes significant economic losses. Among the most harmful pollutants is PM2.5, fine particulate matter that can penetrate deep into the lungs and enter the bloodstream. Based on the GAINS model developed by International Institute for Applied Systems Analysis, mortality attributable to PM2.5 exposure in 2030 is estimated to result in approximately US$53.85 million in losses from premature deaths, while respiratory-related restricted activity days are projected to cost a further US$10.19 million (Kiesewetter et al., 2023). Yet, despite strong evidence that reducing air pollution can deliver substantial social and economic benefits, many clean air interventions still struggle to attract financing.
The central question is no longer whether cleaner air matters. The real question is: why do solutions with clear public value remain difficult to turn into bankable action?
Companies are aware, but still face implementation barriers
Globally, companies contribute significantly to greenhouse gas emissions and air pollutants through their operations, energy use, transport, logistics, industrial processes, and supply chains. As the health, environmental, and economic risks associated with poor air quality become more visible, companies are increasingly expected to understand, measure, and manage their contribution to air pollution. A GRI study of 1,000 companies found that fewer than 40% mentioned specific air pollutants in their sustainability reports (Ozdemir & Pérez Ludeña, 2026).
The main challenges to corporate action on air pollution arise from both internal and external factors. According to an initial global survey of 450 UN Global Compact members conducted by UN Global Compact & UNEP in 2026, companies face several internal barriers, including gaps in emissions inventories, limited data availability, and a lack of clear organizational guidance. Externally, corporate action is constrained by high capital expenditure requirements, methodological challenges, limited regulatory incentives, and unclear policy direction.
PM2.5 in Greater Jakarta: The Invisible Pollutant Demanding Urgent Action
Air pollution consists of a range of harmful substances released from fuel combustion to agriculture, and waste management. Key air pollutants include particulate matter, nitrogen oxides (NOx), sulfur dioxide (SO₂), carbon monoxide (CO), ozone (O₃), volatile organic compounds (VOCs), and ammonia (NH₃) (World Health Organization [WHO], 2021). Among these pollutants, fine particulate matter with a diameter of 2.5 micrometres or smaller known as PM2.5 poses one of the most serious threats to human health because it can remain suspended in the air, travel over long distances, and penetrate deeply into the human body. PM2.5 is particularly harmful because of its extremely small size, it can penetrate deep into the lungs and even enter the bloodstream. Long-term exposure has been associated with serious health conditions, including cancer, diabetes, and cardiovascular disease (WHO, n.d.).
Sources: Environmental Protection Department, Greenpeace
The urgency is especially visible in Greater Jakarta, where PM2.5 concentrations are estimated to range from 30 to 55 μg/m³, around six to eleven times higher than the WHO 2021 Air Quality Guideline of 5 μg/m³ for annual PM2.5 exposure. WHO’s air quality guidelines provide health-based recommendations for key air pollutants, including PM2.5, and state that exceeding these guideline levels is associated with important risks to public health (Hasan, 2025).
According to Ratna Kartadjoemena, Co-founder Bicara Udara during the Corporate Sustainability for Cleaner Air and Sustainable Growth, Jakarta, 22 April 2026, The sources of PM2.5 vary across Greater Jakarta, which means solutions must be location and sector-specific. Transport is the dominant source in Jakarta, South Tangerang City, and Bogor City, while power plants are the main source in Tangerang Regency. Industry dominates in Bogor Regency, while PM2.5 emissions in Bekasi Regency are mainly driven by a combination of industrial and power plant activities.
The economic case is strong, but not automatically bankable
From a macroeconomic perspective, investing in air pollution reduction can deliver compelling returns. Marissa Malahayati, PhD., Environmental Economist at the World Bank, presented two intervention scenarios for reducing PM2.5 emissions in Greater Jakarta during the same event.
Under the high-feasibility scenario, PM2.5 emissions could be reduced by 39.5% with a total investment of US$1.25 billion, including US$0.67 billion in government investment. This scenario includes installing industrial pollution control devices at the 54 most polluting facilities, introducing Euro IV fuel for buses and trucks, and improving household waste management.
Under the more ambitious scenario, PM2.5 emissions could be reduced by 63.2% with a total investment of US$5 billion, including US$1.2 billion in government investment. Measures in this scenario include installing industrial pollution control devices at the 63 most polluting facilities, adopting Euro IV fuel for buses and trucks, retrofitting trucks with diesel particulate filters, and strengthening both household and agricultural waste management.
Adapted from Corporate Responsibility for Cleaner Air and Sustainable Growth, Jakarta, 22 April 2026
The projected economic benefits are substantial. The high-feasibility scenario could generate estimated benefits of US$490.3 million to US$1.59 billion, while the ambitious scenario could generate even greater benefits of US$1.09 billion to US$3.44 billion. These benefits come from improved labor productivity, avoided premature deaths, and lower health system and household recovery costs.
However, this is where the central challenge begins. The benefits of cleaner air are large, but they are often distributed across society. Meanwhile, project developers and lenders need predictable revenues, clear cash flows, and manageable risks. In other words, cleaner air has strong economic value, but that value does not always translate into bankable project returns.
The bankability gap remains the bottleneck
According to Rahadiyan Prasetya, Debt Finance, Climate Change & Energy Transitions Lawyer at HHP Law Firm during the same event, Indonesia already has a sustainable finance framework through Indonesia Taxonomy for Sustainable Finance, and commercial banks are becoming increasingly open to green and transition assets. However, many air pollution reduction projects still struggle to demonstrate bankability, particularly because they lack strong and predictable cash flow projections that lenders need to justify financing.
This highlights a fundamental mismatch. Air pollution reduction creates public benefits, such as avoided healthcare costs, improved productivity, and lower mortality risks. But these benefits are not always captured by the project owner as direct revenue. As a result, projects with high social value may still appear financially weak from a lender’s perspective.
Blended finance can help bridge early-stage risks
One financing approach that could help mitigate investment risk is blended finance. This mechanism can help close the financing gap for projects that generate significant development benefits but are not yet fully commercially viable. By combining commercial capital with concessional or development finance, blended finance can absorb or reduce early-stage risks, strengthen project viability, and mobilize greater private-sector investment.
Adapted from Jakarta Globe Reporting on TBS’s US$ 15 million ADB-TBS e-mobility financing in Indonesia
A recent financing package for electric mobility in Indonesia provides a concrete example of how blended finance can be applied in practice. PT TBS Energi Utama Tbk secured US$15 million in financing to support the expansion of electric motorcycles and battery-swapping infrastructure. The package combines a US$5 million loan from the Asian Development Bank, US$5 million from the Australian Climate Finance Partnership administered by ADB, and an additional US$5 million from Bank DBS Indonesia (DBS Bank, 2024).
While electric mobility is not the only pathway to cleaner air, this example shows how blended finance can help support emerging low-carbon sectors where upfront costs, market risks, and enabling infrastructure needs remain high. Similar approaches could be relevant for air pollution reduction projects that generate strong public benefits but still face uncertain commercial returns.
Corporate action must go beyond financing
Financing is only one part of the solution. Companies also have a direct role in reducing air pollution through operational changes, supply chain engagement, and policy advocacy. An example from India can be seen in Mahindra Group’s Planet Positive Initiative, as presented during the Business Leadership for Clean Air Webinar by UN Global Compact on 29 April 2026. The initiative illustrates that corporate action on air pollution is not limited to reducing internal emissions. It also extends to transport transformation and supply chain improvement.
Mahindra promotes the transition to electric vehicles, including a target for electric three-wheelers to reach 100% by 2030, while also strengthening emissions-per-kilometer standards for internal combustion engine vehicles. In its operations and supply chain, the company works to reduce construction dust and encourages suppliers to adopt renewable energy on its operation. 47.6% of Mahindra’s suppliers are using renewable energy (Mahindra & Mahindra Limited, 2025).
Disclosure can push companies toward measurable action
Looking ahead, air pollution is becoming an increasingly important corporate disclosure issue. Companies will be expected to measure, manage, and report not only their greenhouse gas emissions, but also the air pollutants generated across their own operations and upstream and downstream value chains.
The Global Reporting Initiative is currently updating its pollution-related standards to strengthen transparency on how companies manage air pollution, including their reduction targets, baselines, progress, pollutant-specific emissions, and related incidents. Relevant disclosures may cover pollutants such as black carbon, carbon monoxide, hazardous air pollutants, nitrogen oxides, PM2.5, and PM10 (Global Sustainability Standards Board [GSSB], 2026).
This emerging disclosure agenda could help move companies from general awareness toward measurable accountability. More robust reporting can enable businesses to identify major emission sources, establish credible targets, monitor progress, and communicate mitigation efforts more transparently to investors, regulators, employees, and affected communities.
Ultimately, Indonesia’s air pollution challenge cannot be addressed through a single intervention. Although the health and economic value of cleaner air is increasingly clear, many projects remain difficult to finance because their benefits are widely shared while their revenue streams remain uncertain. Blended finance can help make these projects more viable, but lasting progress will also require companies to act beyond financing by reducing emissions across their operations and value chains, supported by stronger disclosure standards that turn commitments into measurable accountability.
For more information about IGCN works on climate and air pollution please contact: [email protected]
Cleaner Air has Economic Value. Why is it Still Hard to Finance?
Despite clear health and economic benefits, air pollution reduction projects often struggle to attract financing because their public value does not easily translate into predictable cash flows.
Authors:
Sabilly Royan, Meidina Amarsa and Salsabila Thanesya
July 15, 2026
Clean air is an urgent issue in Indonesia, not only a public health one, but also a business, productivity, and investment one. Four of the ten most prevalent diseases in Indonesia are respiratory illnesses associated with air pollution. Between 2018 and 2022, public health spending on respiratory diseases reached a significant level and showed an increasing trend each year. Pneumonia accounted for approximately IDR 8.7 trillion in healthcare costs, followed by chronic obstructive pulmonary disease (COPD) at IDR 1.8 trillion, asthma at IDR 1.4 trillion, and lung cancer at IDR 766 billion (Ministry of Health of the Republic of Indonesia, 2023).
Beyond direct healthcare costs, air pollution also causes significant economic losses. Among the most harmful pollutants is PM2.5, fine particulate matter that can penetrate deep into the lungs and enter the bloodstream. Based on the GAINS model developed by International Institute for Applied Systems Analysis, mortality attributable to PM2.5 exposure in 2030 is estimated to result in approximately US$53.85 million in losses from premature deaths, while respiratory-related restricted activity days are projected to cost a further US$10.19 million (Kiesewetter et al., 2023). Yet, despite strong evidence that reducing air pollution can deliver substantial social and economic benefits, many clean air interventions still struggle to attract financing.
The central question is no longer whether cleaner air matters. The real question is: why do solutions with clear public value remain difficult to turn into bankable action?
Companies are aware, but still face implementation barriers
Globally, companies contribute significantly to greenhouse gas emissions and air pollutants through their operations, energy use, transport, logistics, industrial processes, and supply chains. As the health, environmental, and economic risks associated with poor air quality become more visible, companies are increasingly expected to understand, measure, and manage their contribution to air pollution. A GRI study of 1,000 companies found that fewer than 40% mentioned specific air pollutants in their sustainability reports (Ozdemir & Pérez Ludeña, 2026).
The main challenges to corporate action on air pollution arise from both internal and external factors. According to an initial global survey of 450 UN Global Compact members conducted by UN Global Compact & UNEP in 2026, companies face several internal barriers, including gaps in emissions inventories, limited data availability, and a lack of clear organizational guidance. Externally, corporate action is constrained by high capital expenditure requirements, methodological challenges, limited regulatory incentives, and unclear policy direction.
PM2.5 in Greater Jakarta: The Invisible Pollutant Demanding Urgent Action
Air pollution consists of a range of harmful substances released from fuel combustion to agriculture, and waste management. Key air pollutants include particulate matter, nitrogen oxides (NOx), sulfur dioxide (SO₂), carbon monoxide (CO), ozone (O₃), volatile organic compounds (VOCs), and ammonia (NH₃) (World Health Organization [WHO], 2021). Among these pollutants, fine particulate matter with a diameter of 2.5 micrometres or smaller known as PM2.5 poses one of the most serious threats to human health because it can remain suspended in the air, travel over long distances, and penetrate deeply into the human body. PM2.5 is particularly harmful because of its extremely small size, it can penetrate deep into the lungs and even enter the bloodstream. Long-term exposure has been associated with serious health conditions, including cancer, diabetes, and cardiovascular disease (WHO, n.d.).
Sources: Environmental Protection Department, Greenpeace
The urgency is especially visible in Greater Jakarta, where PM2.5 concentrations are estimated to range from 30 to 55 μg/m³, around six to eleven times higher than the WHO 2021 Air Quality Guideline of 5 μg/m³ for annual PM2.5 exposure. WHO’s air quality guidelines provide health-based recommendations for key air pollutants, including PM2.5, and state that exceeding these guideline levels is associated with important risks to public health (Hasan, 2025).
According to Ratna Kartadjoemena, Co-founder Bicara Udara during the Corporate Sustainability for Cleaner Air and Sustainable Growth, Jakarta, 22 April 2026, The sources of PM2.5 vary across Greater Jakarta, which means solutions must be location and sector-specific. Transport is the dominant source in Jakarta, South Tangerang City, and Bogor City, while power plants are the main source in Tangerang Regency. Industry dominates in Bogor Regency, while PM2.5 emissions in Bekasi Regency are mainly driven by a combination of industrial and power plant activities.
The economic case is strong, but not automatically bankable
From a macroeconomic perspective, investing in air pollution reduction can deliver compelling returns. Marissa Malahayati, PhD., Environmental Economist at the World Bank, presented two intervention scenarios for reducing PM2.5 emissions in Greater Jakarta during the same event.
Under the high-feasibility scenario, PM2.5 emissions could be reduced by 39.5% with a total investment of US$1.25 billion, including US$0.67 billion in government investment. This scenario includes installing industrial pollution control devices at the 54 most polluting facilities, introducing Euro IV fuel for buses and trucks, and improving household waste management.
Under the more ambitious scenario, PM2.5 emissions could be reduced by 63.2% with a total investment of US$5 billion, including US$1.2 billion in government investment. Measures in this scenario include installing industrial pollution control devices at the 63 most polluting facilities, adopting Euro IV fuel for buses and trucks, retrofitting trucks with diesel particulate filters, and strengthening both household and agricultural waste management.
Adapted from Corporate Responsibility for Cleaner Air and Sustainable Growth, Jakarta, 22 April 2026
The projected economic benefits are substantial. The high-feasibility scenario could generate estimated benefits of US$490.3 million to US$1.59 billion, while the ambitious scenario could generate even greater benefits of US$1.09 billion to US$3.44 billion. These benefits come from improved labor productivity, avoided premature deaths, and lower health system and household recovery costs.
However, this is where the central challenge begins. The benefits of cleaner air are large, but they are often distributed across society. Meanwhile, project developers and lenders need predictable revenues, clear cash flows, and manageable risks. In other words, cleaner air has strong economic value, but that value does not always translate into bankable project returns.
The bankability gap remains the bottleneck
According to Rahadiyan Prasetya, Debt Finance, Climate Change & Energy Transitions Lawyer at HHP Law Firm during the same event, Indonesia already has a sustainable finance framework through Indonesia Taxonomy for Sustainable Finance, and commercial banks are becoming increasingly open to green and transition assets. However, many air pollution reduction projects still struggle to demonstrate bankability, particularly because they lack strong and predictable cash flow projections that lenders need to justify financing.
This highlights a fundamental mismatch. Air pollution reduction creates public benefits, such as avoided healthcare costs, improved productivity, and lower mortality risks. But these benefits are not always captured by the project owner as direct revenue. As a result, projects with high social value may still appear financially weak from a lender’s perspective.
Blended finance can help bridge early-stage risks
One financing approach that could help mitigate investment risk is blended finance. This mechanism can help close the financing gap for projects that generate significant development benefits but are not yet fully commercially viable. By combining commercial capital with concessional or development finance, blended finance can absorb or reduce early-stage risks, strengthen project viability, and mobilize greater private-sector investment.
Adapted from Jakarta Globe Reporting on TBS’s US$ 15 million ADB-TBS e-mobility financing in Indonesia
A recent financing package for electric mobility in Indonesia provides a concrete example of how blended finance can be applied in practice. PT TBS Energi Utama Tbk secured US$15 million in financing to support the expansion of electric motorcycles and battery-swapping infrastructure. The package combines a US$5 million loan from the Asian Development Bank, US$5 million from the Australian Climate Finance Partnership administered by ADB, and an additional US$5 million from Bank DBS Indonesia (DBS Bank, 2024).
While electric mobility is not the only pathway to cleaner air, this example shows how blended finance can help support emerging low-carbon sectors where upfront costs, market risks, and enabling infrastructure needs remain high. Similar approaches could be relevant for air pollution reduction projects that generate strong public benefits but still face uncertain commercial returns.
Corporate action must go beyond financing
Financing is only one part of the solution. Companies also have a direct role in reducing air pollution through operational changes, supply chain engagement, and policy advocacy. An example from India can be seen in Mahindra Group’s Planet Positive Initiative, as presented during the Business Leadership for Clean Air Webinar by UN Global Compact on 29 April 2026. The initiative illustrates that corporate action on air pollution is not limited to reducing internal emissions. It also extends to transport transformation and supply chain improvement.
Mahindra promotes the transition to electric vehicles, including a target for electric three-wheelers to reach 100% by 2030, while also strengthening emissions-per-kilometer standards for internal combustion engine vehicles. In its operations and supply chain, the company works to reduce construction dust and encourages suppliers to adopt renewable energy on its operation. 47.6% of Mahindra’s suppliers are using renewable energy (Mahindra & Mahindra Limited, 2025).
Disclosure can push companies toward measurable action
Looking ahead, air pollution is becoming an increasingly important corporate disclosure issue. Companies will be expected to measure, manage, and report not only their greenhouse gas emissions, but also the air pollutants generated across their own operations and upstream and downstream value chains.
The Global Reporting Initiative is currently updating its pollution-related standards to strengthen transparency on how companies manage air pollution, including their reduction targets, baselines, progress, pollutant-specific emissions, and related incidents. Relevant disclosures may cover pollutants such as black carbon, carbon monoxide, hazardous air pollutants, nitrogen oxides, PM2.5, and PM10 (Global Sustainability Standards Board [GSSB], 2026).
This emerging disclosure agenda could help move companies from general awareness toward measurable accountability. More robust reporting can enable businesses to identify major emission sources, establish credible targets, monitor progress, and communicate mitigation efforts more transparently to investors, regulators, employees, and affected communities.
Ultimately, Indonesia’s air pollution challenge cannot be addressed through a single intervention. Although the health and economic value of cleaner air is increasingly clear, many projects remain difficult to finance because their benefits are widely shared while their revenue streams remain uncertain. Blended finance can help make these projects more viable, but lasting progress will also require companies to act beyond financing by reducing emissions across their operations and value chains, supported by stronger disclosure standards that turn commitments into measurable accountability.
For more information about IGCN works on climate and air pollution please contact: [email protected]