Blended Finance is the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development.
Current levels of development financing for sustainble development goals (SDGs) are not sufficient.
Watch this 2 minute video from our sponsor Bank of America explaining the importance of blended finance
Impact Framework
Why is there a need for Blended Finance?
Investors
Searching for sound investment opportunities, but confronted with lack of scalable sustainable enterprises
Sustainable Enterprises
Struggling with low profitability and scalability
Impact Framework
There are a total of 17 UN SDGs which guide the development of blended finance initiatives.
Impact Framework
Blended Finance has mobilized approximately $152B in capital towards sustainable development in developing countries to-date
Impact Framework
The UN estimates that the total financing need to achieve the SDGs is nearly $4 trillion annually. Current levels of development financing are not sufficient, with approximately $2.5 trillion funding gap per annum to realize SDGs in developing countreis alone.
Impact Framework
Blended Finance is the use of catalytic capital from public and philanthropic sources to increase private sector investment in sustainable development
Catalytic Capital is debt, guarantees, and other investments that accept disproportionate risk and/or concessionary returns relative to a conventional investment
Concessionary Return is a return on an investment that sacrifices some financial gain to achieve a social benefit
Impact Framework
The sources of catalytic capital are concessionary and institutional investors
Impact Framework
Each Blended Finance instrument listed below are applied by development and philanthropic actors to encourage private capital flows into emerging and frontier markets in regards to SDGs.
Impact Framework
Key Stakeholders
Investors
Provide long-term scale capital to fund critical development needs
Intermediaries
Teams of finance subject matter experts, sponsored by development banks or private institutions who match projects to investment capital
Project Sponsors
Entities trying to develop a sustainable development project in a certain area including clean water access, medical facilities, etc.
The 5 Steps to Designing a Blended Finance Project
The Organization for Economic Cooperation and Development (OECD) outlined 5 principles to designing and implementing effective and transparent blended finance programs
All development finance interventions, including blended finance activities, are based on the mandate of development finance providers to support developing countries in achieving social, economic, and environmentally sustainable development
Does the project maximize development outcomes?
Does the project articulate blended finance objectives?
Does the project commit to high quality standards?
Development finance in blended finance should facilitate the unlocking of commerical finance to optimize total financing directored towards ddvelopment outcomes.
Does the project ensure development additionality?
Does the project ensure financial additionality?
Does the project ensure commerical sustainability?
All development finance interventions, including blended finance activities, are based on the mandate of development finance providers to support developing countries in achieving social, economic, and environmentally sustainable development
Does the project support local development initiatives?
Does the project support local government development?
Does the project support promotion of sound enable environment?
All development finance interventions, including blended finance activities, are based on the mandate of development finance providers to support developing countries in achieving social, economic, and environmentally sustainable development
Does the project support local development initiatives?
Does the project support local government development?
Does the project support promotion of sound enable environment?
All development finance interventions, including blended finance activities, are based on the mandate of development finance providers to support developing countries in achieving social, economic, and environmentally sustainable development
