Blended finance

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Blended finance^[1] is defined as "the strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets",^[2] 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 in private and public financing per year as of 2017 estimates,^[3][4] and an additional $13.5 trillion^[5] to implement the COP21 Paris climate accord. The concept of blended finance can contribute to raising the private financing needed. It 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.^[6]

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Building upon evidence from a previous survey^[7] done on behalf of the World Economic Forum, the OECD released recent findings^[8] which identified 180 blended finance funds and facilities, with $60.2 billion in assets invested across 111 developing countries and 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 international development finance. As a result, blended finance principles^[9] have been adopted by the Development Assistance Committee to guide the design and implementation of the concept, which aims to use development finance, including philanthropic resources, to align additional finance towards meeting the SDGs.