How do you have better character shading with occlusion?

Hey there and sorry for the kind of unclear thread title. Basically, I’m an environment artist and that’s pretty much the only specialty I have. I am also a teacher, and for a project for my students, I thought I’d give them a project that would really motivate them to complete it. So I thought I would recreate Link from OOT in a more realistic fashion (still kind of stylized). The problem I have is that the occlusion looks fake and low-quality. If I move the global occlusion setting to have something more good looking with the character, the environment will get a bad occlusion, which is not an option.

Here’s two pictures to illustrate the issue:

Original, the character lighting looks fake:

Tweaked Occlusion, but the occlusion is clearly visible in the background (which is bad):

Again, as I am not a character artist, I’d love to hear how you guys/gals handle these parts. I’m also open to know more about hair shading!

Thanks,
Sam