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Financing Climate & Sustainable Development
While blended finance can help close the SDG financing gap in emerging markets and developing economies, its promise is hindered by entrenched structural constraints. This report diagnoses the systemic barriers holding back scale, proposes a path forward, and assigns clear roles and responsibilities to key actors across the ecosystem.
Blended finance has the potential to help close the sustainable development financing gap. Strategically combining public and philanthropic capital to unlock private investment, it has proven to be an effective tool to de-risk impact investments. But without bold, structural reform, it risks remaining a niche tool – promising in theory, underperforming in practice. Drawing on over 65 expert interviews and in-depth analysis, this report maps the systemic barriers preventing blended finance from operating at scale, and outlines a practical path forward. With bold leadership and coordinated reform, blended finance can become a mainstream channel for sustainable investment at scale.
Despite its growth, blended finance faces persistent bottlenecks:
To go from niche to necessary, the report identifies five areas for urgent reform:
Every stakeholder has a specific role to play and coordinate their actions. For each of our recommendations, we provide a clear snapshot on the stakeholders involved and what they must do to scale Blended Finance.
Structural obstacles are real, but solvable. This report offers a roadmap to unlock blended finance’s full potential. With bold leadership and coordinated reform, blended finance can become a mainstream channel for sustainable investment at scale.
The report also used a machine learning–based portfolio simulation to assess the investment case for blended finance. By analyzing historical transaction data, it aimed to simulate expected returns for hypothetical blended finance portfolios. Although the methodology is detailed, results could not be disclosed due to the systemic constraint we highlight in our findings—namely, limited data quality and availability.
In collaboration with the SDG Impact finance Initiative (SIFI) and Route 17.
SIFI, established in 2021, is a public-private partnership that aims to mobilize CHF 1 billion in private capital by 2030 to support the achievement of the Sustainable Development Goals (SDGs) in emerging markets. By offering innovative financial solutions, including first-loss investments and grants, SIFI works to strengthen the ecosystem for impact investing and support sustainable development efforts.
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