Blended Finance

Blended finance is defined "as the strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets", resulting in positive results for both investors and communities. Blended finance offers the possibility to scale up commercial financing for developing countries and to channel such financing toward investments with development impact. As such, Blended finance is designed to support progress towards the Sustainable Development Goals (SDGs) set forth by the United Nations. Meeting the SDGs will require an additional $2.5 trillion per year, and an additional $13.5 trillion to implement the COP21 Paris climate accord. The concept of blended finance was first recognized as a solution to the funding gap in the outcome document of the Third International Conference on Financing for Development in July 2015

A recent survey conducted on behalf of the World Economic Forum identified 74 pooled funds and facilities representing $25.4 billion in blended finance assets, with the funds impacting over 177 million lives, demonstrating the tremendous potential of blended finance to close the funding gap required to finance the ambitious Sustainable Development Goals (SDGs) agenda and deliver development outcomes.

The concept has been gaining popularity lately within the world of development finance.

The term blended finance implies the mixing of both public and private funds through a common investment scheme or deal, with each party using their expertise in a complementary way. The concept and model was developed within the Redesigning Development Finance Initiative from the World Economic Forum.

The resources needed to bridge the funding gap to meet SDG requirements cannot be met through public resources (such as Official Development Assistance) alone, and private investment will be key to increasing the scope and impact of development finance and philanthropic funders. Only a small percentage of the worldwide invested assets of banks, pension funds, insurers, foundations and endowments, and multinational corporations, are targeted at sectors and regions that advance sustainable development. The current challenge for the SDG era is how to channel more of these private resources to the sectors and countries that are central for the SDGs and broader development efforts. This is particularly important in a context where public resources are increasingly under pressure, while private flows to developing countries are increasing significantly. Blended finance is designed to fuel vast inflows of private capital to support these development outcomes.

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Wikipedia