On November 21, 2024, we hosted the third session of the “Constructing Change Webinar Series”, as part of the lead-up to Building Bridges 2024 in Geneva this December. Titled “Blended Finance: Unlocking Private Investment for Climate Action”, the session brought together experts from public and private sectors to discuss the transformative role of blended finance in scaling investments for climate adaptation, biodiversity, and sustainable development.

With global milestones like COP16 on Biodiversity in Cali and the ongoing COP29 discussions in Baku, the urgency of mobilizing capital for emerging markets has never been clearer. These economies, where over 90% of countries are non-investment grade, represent both the greatest need and the greatest opportunity for impactful investment. Blended finance that mobilizes private investment has emerged as the critical strategy to address and overcome the investment gap for climate action, and more recently seen as a prospective solution for biodiversity restoration and nature-based solutions. 

Moderator Chris Club, Managing Director at Convergence Blended Finance, opened the discussion by defining blended finance as a mechanism that combines public and philanthropic funds to de-risk investments and attract private capital. “Despite its potential,” Chris noted, “blended finance accounts for only 1% of the SDG and climate investment needs in developing economies.”

Barriers that inhibit private capital flows into emerging markets

Daniela Savoia, EM Debt Fund Manager – Edmond de Rothschild, highlighted the lack of transparency around project risks, often deterring private investors. She emphasized that better visibility and blended finance tools, such as guarantees and concessionary financing, can address these challenges. Vikram Widge, Senior Advisor at the Climate Policy Initiative (CPI), pointed to the fragmented nature of projects in emerging markets, which often lack the scale needed to attract institutional investors. Andrey Shlyakhtenko, Lead of Blended Finance Operations, Blended Finance and Corporate Strategy Department – International Finance Corporation, noted that biodiversity and nature-based solutions often lack immediate financial returns, making private capital reluctant to engage without strong de-risking mechanisms. Patrick Nussbaumer, Strategic Partnerships Director from UBS Optimist Foundation, highlighted that many private investors are hesitant to adopt long-term perspectives required for complex, multi-decade climate adaptation projects.

Practical Solutions for Scaling Investments

The session offered actionable strategies for overcoming these challenges and scaling blended finance for greater impact:

  • De-Risking Investments – Daniela provided examples of concessionary finance reducing risks for African corporates, demonstrating how blended finance can unlock private capital.
  • Catalytic Partnerships – Patrick emphasized philanthropy’s role in amplifying private investments through catalytic capital and impact transparency. He shared insights from the SDG Outcomes Fund, which is a $100 million blended fund which deploys outcome-base finance.
  • Aggregating Projects for Institutional Investors – Vikram advocated for securitizing smaller projects into portfolios, a method that increases their attractiveness for institutional investment. “We need to make investments big, bold, and boring to bring in the scale we need,” he said.
  • Focusing on Long-Term Resilience – Andrey encouraged a shift in evaluating projects, emphasizing their long-term cash flow stability and resilience benefits rather than short-term profitability.

Inspiring Collaboration for a Sustainable Future

This webinar demonstrated that blended finance is not just a tool but a catalyst for transformative change in emerging markets. By aligning public, private, and philanthropic capital, blended finance can unlock opportunities that otherwise wouldn’t exist, paving the way for scalable solutions to climate and biodiversity challenges.

As moderator Chris Club concluded, “Blended finance holds the key to mobilizing the trillions needed for the Paris Agreement and SDG goals, but it requires bold partnerships, trust, and a willingness to innovate.”

With these insights, the stage is set for Building Bridges 2024, where public and private leaders will explore how finance can accelerate global progress towards sustainability.

Further reading:

Global Landscape of Climate Finance 2024, Climate Policy Initiative, October 2024
State of Blended Finance Report 2024 – Climate Edition, Convergence, October 2024
Climate Finance Provided and Mobilised by Developed Countries in 2013-2022, OECD, May 2024

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