Global Blended Finance Hits US$15 Billion

ESG Investor

Climate-focused transactions are also on the rise, but private investors’ efforts have been limited by data availability. 

Catalytic capital flows to de-risk projects centred around sustainable agriculture, renewable energy, and health and education projects across emerging markets (EMs) have increased in 2023 after a ten-year lull. 

According to blended finance network Convergence’s latest State of Blended Finance report, the market rebounded to a five-year high of US$15 billion in 2023 after ten years of consistently low volumes, with multilateral development banks (MDBs) and development finance institutions (DFIs) investing greater sums. 

Convergence recorded 1,123 blended finance transactions totalling US$213 billion, outstripping the yearly 85 deals average of the past decade. Around 40% of these deals were valued at over US$100 billion in 2023, compared to 17% in 2022 and 28% in 2021. 

“Climate has become an even stronger focus [within blended finance], with financing flows increasing by over 100% in the last year and around half of these climate-focused deals worth US$100 million or more,” confirmed Convergence Manager Nick Zelenczuk during a webinar that launched the report. 

Within that, the energy sector was the most active segment, accounting for nearly a third of total deal activity and US$101 billion of capital flows. 

“Much of this investment targets renewable energy development,” the report mentioned. “Over the last year, 91% of blended transactions in the sector channelled financing to renewable energy, with nearly US$10 billion going towards solar projects.” 

In 2022, Convergence had warned that climate-oriented blended finance transactions were on the decline, having dipped 60% from US$36.5 billion in 2016-18 to US$14 billion in 2019-21. 

In its 2023 climate-focused blended finance report, the network highlighted an uptick in climate-focused blended finance, with large transactions such as the US$1.11 billion SDG Loan Fund devised by Allianz Global Investors and the Dutch Entrepreneurial Development Bank. 

Developing countries currently face an estimated US$4 trillion annual investment gap to meet the UN Sustainable Development Goals (SDGs). Blended finance is seen as a vital tool to contribute the capital flows needed to fulfil both these and the Paris Agreement goals. 

Cards on the table 

Despite the significant

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