Blended finance is a key tool for direct mobilisation of commercial capital and offers an opportunity to move towards fully market-based financing in support of the SDGs. The private sector plays an important role in developing, launching and executing projects in developing countries. Both dimensions of the private sector, as the financier and as the investee, are crucial in the context of blended finance. The Principles focus primarily on commercial actors as a source of potential financing for development that has not yet been targeted towards the SDGs.
The Principles have been developed in close co- ordination with other international initiatives on blended finance. This includes notably the DFI Enhanced Principles on Blended Concessional Finance for Private Sector Projects which address critical blended finance topics at the operational level by taking the perspective of implementing institutions. Meanwhile, the Business & Sustainable Development Commission has focused on gathering the private sector perspective.
The Principles are targeted at the policy level, re ecting the development mandate of DAC donors, and the policies and instruments under their political oversight. They aim to ensure that blended finance is deployed in the most effective way to address the financing needs for sustainable development as set out in the Addis Ababa Action Agenda (AAAA), by mobilising additional commercial capital and enhancing impact. Whereas both concessional and/or non-concessional development finance can be part of blended structures, the use of concessional resources requires particular care, given its scarcity. Moreover, potential competitive distortions need to be minimised and complementary objectives, such as structural reforms, pursued.