Blended Finance


Here we explain why blended finance is critical and offer some handy resources for those interested in learning more.

Table of Contents

Why Blended Finance is Critical

Most projects and activities that are needed to achieve the SDGs are not profitable, or not profitable enough, or not yet profitable. Also, most are small scale. And most are in emerging markets.

At the same time, we need trillions annually (estimates vary) to flow to these activities, much, much more than governments, NGOs and charities have.

So, we need institutional investors like pension funds and insurance companies because that’s where the money is. However, they do not invest in small-scale, emerging markets projects that are not profitable. Also, it’s unlikely we can persuade pension fund boards to make impact-first investments at scale – their primary aim is to invest on behalf of pensioners which comes with strict investment criteria.


Also, none of the existing ESG activities (labels, ESG funds, green bonds, ESG integration, SFDR, PRI, TCFD, Taxonomy, Net Zero) are contributing much, if at all, to the achievement of the SDGs. They mostly achieve labeling and virtue-signaling, when it is enabling of investments at scale that we need to make a real difference.

If we want to scale up SDG-aligned financing fast in order to meet the 2030 deadline, we need to start tailoring the needed projects so that they do meet institutional investors’ requirements, and this is what blended finance does: government (or DFI or philanthropic) interventions such as guarantees, first-loss positions, grants, technical assistance, subordinated debt or junior equity, can change the risk/return profile of impactful projects enabling institutional investors to allocate capital to them.


Below, we’ve put together some valuable resources on blended finance and SDG funding, which we hope you will find useful. Much of it is taken from leading organisations in the field and provides a comprehensive overview on the topic, alongside some more detailed reports and publications for those who already have a strong understanding.

To complement this, we would also like to point you to our own publications under the Thought Leadership tab, in which we aim to set out the roles of key actors within blended finance.

Video resources

TEDx - Heidi Finskas on impact in sustainable development

In this TEDx Talk, Heidi Finskas, Vice President of corporate responsibility at KLP, breaks down renewable energy investment into developing nations. Here, she discusses how blended finance can allow pension funds to invest into emerging markets; Finskas’ talk clearly demonstrates the profound impact private sector investment can have in sustainable development.

Devex - overview of core principles, characteristics, debates

In this video, Devex – a global development news organisation – provides a brief overview of blended finance, detailing the core principles and characteristics and debates within the field; A great starting point for gaining a core understanding of blended finance.

Joan Larrea: An Overview of Blended Finance - What is it and does it work?

Similarly, a presentation by Convergence Blended Finance CEO Joan Larrea, at the 2022 Scaling Blended Finance Conference, offers a more comprehensive definition of blended finance. In her presentation, Larrea discusses the concept of blended finance, how, when and where this approach is best utilised, as well as providing an overview of the role stakeholders play in this area.

Center for Sustainable Finance and Private Wealth: Definition and overview

A recording from the Center for Sustainable Finance and Private Wealth (CSP) at the University of Zurich adds on to these previous videos. In this recording, the CSP clearly defines the working of blended finance and its key features, providing a brief overview of the different structures that blended finance can take, along with current debates and implementation challenges within the sector.

Voices from the field

British International Investment (CDC)

The UK’s Development Finance Institution since 1948. As part of the CDC Insight series, Paddy Carter (2021) does a brilliant job at explaining the economics behind development finance and their impact on the workings of DFIs (pdf). He particularly analyses how DFIs can have the greatest impact when considering the core mechanics and aims behind these transactions.

Center for Global Development

An economic research institute attempting to help drive policy and practice to tackle contemporary challenges within development. The CGD have produced a plethora of research on development and development finance.

Convergence Blended Finance

One of the key players in the field, they offer a brief yet comprehensive insight into blended finance. They also provide many articles on development projects and finance. Specifically helpful for summaries as well as case studies from many leading institutes in field.

European Bank for Reconstruction and Development

One of the key players in development finance and projects. They’ve produced a set of short publications on donor partnerships and financial tools, discussing how they are utilised by EBRD. They also offer a list of projects they are currently working on.

International Development Finance Club

Group of 26 development banks from all over the world, offering an incredibly useful overview of blended finance, setting out key definitions, characteristics, and tools alongside its core principles and application – quite possibly the best starting point for any newcomer (pdf).

International Finance Corporation

Provides a brilliant starting point for newcomers to the sector; provides great explanation and summary of what blended finance is, how it works, examples of it in use, and many resources.

Office of Economic Cooperation and Development

Probably the most useful source of information around blended finance principles comes from the OECD. Provides definition of key terms as well as accompanying guidance and principles, offering comprehensive overview to any individuals interested in the topic.

Overseas Development Institute

The ODI are a global leading think tank specialising in development policy research and implementation, aiming to guide policy makers towards a more sustainable and equitable future. Offer wide array of publications, specifically on Development Banks, with much of it pertaining to blended finance.

Setting the scene

Helmut Führer sets the scene with a paper published by the OECD (1996), providing an in-depth view of the history of Official Development Assistance (pdf). Whilst not directly associated with blended finance, an insightful deep dive for anyone curious about the evolution of development assistance.

One of the first papers surrounding the topic of blended finance comes from the EBRD (2002). This paper discusses economic analysis around subsidies and the financing of projects by MDBs (pdf), and how to ensure said projects comply with moral banking principles and impact objectives. Whilst blended finance has evolved over the last two decades, this is still a valuable discussion to be considered.

The first joint report from the DFI Working Group (2013), bringing together heads of DFIs and MDBs. This report brings together DFIs’ commitment to the private sector for development, and the core principles of MDBs, creating joint analysis of how best to utilise concessional finance in the private sector to create sustainable ‘additionality’ (pdf). Provides useful insight into concessional finance and its workings.

Paddy Carter (2015), analyses the case for subsidising the private sector (pdf), discussing the rationale behind it and what successful implementation would look like. He concludes that whilst perfect allocation of subsidies is difficult to achieve and track the results of, subsidising the private sector when it is grounded in economic theory, can be an effective way of ensuring societal benefit.

Summary reports

Very useful documents published annually by the DFI working group (Chaired by the IFC), which outlines the key work and data on concessional finance for private sector projects gathered from that year. A fantastic resource for gaining a strong understanding of the progress and value of blended finance and the real-world projects it helps finance.

Blended Finance in Action

Recent publication by the European Corporate Governance Institute (2023) discusses the uses of blended finance, emphasising its positive impact on financing biodiversity projects.

Publication from the OECD (2020) discusses the role that blended finance can play for supporting developing nations’ recovery from the detrimental impact of the pandemic. The OECD specifically focuses on the role blended finance can play in creating sustainable projects which will have medium-long term impact.

Article published in the Agriculture and Human Values Journal (2020) discusses the use of blended finance in funding sustainable agriculture, specifically aiming to help end world hunger and establish sustainable agriculture practices in emerging markets. The authors discuss the under-utilisation of blended finance in investment, reinforcing the significant impact it can have when fully utilised.

Development databases

The OECD offer two sources of data which both grant a wide perspective on the current progress of development: Development Finance Data and International Development Statistics.

The most extensive database derives from The World Bank, offering a wide array of indicators, statistics and information on global economics and development.

Our own publications

In addition to these resources, we would also like to point you towards our own work, summarising the role of different actors within the blended finance field, as well as how blended finance can be used to tackle climate change and the biodiversity crisis. We would recommend our ‘Blended Finance is Like Music Series’ for any newcomers to the topic, where we clearly lay out the ‘who’ and ‘how’ of blended finance:

Let us guide you

Although crucial for the future of ESG and our planet, blended finance is still an uncharted territory.

Get in touch with us to discuss how we can help you find your way.