Blended Finance: Unlocking Commercial Finance for Sustainable Development

Abstract

The transition to a green economy will requires massive funding. It is estimated that the investment needs of emerging markets and developing economies could reach $1 trillion a year by 2030 (International Monetary Fund, 2022). Much of this should have come from the governments and international agencies like CDC Group or International Finance Corporation (IFC). Unfortunately, most economies around the world are running large deficits. On the other hand, the development institutions have a wide array of financing requests. While institutional investors have been involved in green finance, they have typically focused on low-risk bankable projects. To achieve Sustainable Development Goals (SDGs) and meet the needs of climate finance there is a need to bring together public and private sources of financing. One approach to solving this problem is blended finance. In fact, in the FY22 budget the Indian government announced the use of blended finance approach for the sunrise sector. The sunrise sector includes healthcare, livelihoods, education, climate action, deep tech, digital economy, pharma and agritech. Thus, the potential for blended finance in India is large.