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__Member Training: A Spotlight on Blended Finance in Latin America and the Caribbean, March 27th, 2024__

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Details to follow.

Member Training: A Spotlight on Blended Finance in Latin America and the Caribbean

Join us for a Spotlight on Blended Finance in Latin America and the Caribbean

Blended Finance in Latin America and the Caribbean

__Member Training: A Spotlight on Blended Finance across the African continent, January 31st, 2024__

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Details to follow.

Member Training: A Spotlight on Blended Finance across the African continent

Join us for a Spotlight on Blended Finance across the African continent

A Spotlight on Blended Finance across the African continent

__Member Training: How Blended Capital is Financing Climate-Smart Agriculture, November 22nd, 2023__

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Details to follow.

Member Training: How Blended Capital is Financing Climate-Smart Agriculture

Join us to learn How Blended Capital is Financing Climate-Smart Agriculture

How Blended Capital is Financing Climate-Smart Agriculture

Please join us virtually for the launch of the 7th edition of our flagship State of Blended Finance report on Wednesday, October 25th at 9:00 am EST.

The State of Blended Finance is Convergence’s annual report on blended finance trends, opportunities, and challenges. This year’s edition of the State of Blended Finance will feature a thematic focus on blended finance for climate.

Register for updates as they become announced. Explore last year's report [here](https://www.convergence.finance/resource/state-of-blended-finance-2022/view).

__Detailed agenda to come.__

2023 State of Blended Finance Virtual Launch

Convergence is launching the 7th edition of the State of Blended Finance Report on Wednesday, October 25th at 9:00 am EST. The State of Blended Finance is Convergence’s annual report on blended finance trends, opportunities, and challenges. This year’s edition will feature a thematic focus on blended finance for climate.

2023 State of Blended Finance Launch

__GIIN Impact Forum: Convergence and Danish MFA Blended Finance Side Event, Thursday, October 5th, 4:00-5:00pm CEST__

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Convergence Blended Finance and the Denmark Ministry of Foreign Affairs invite you to a one hour session dedicated to blended finance and private investment mobilization for the SDGs and Paris Agreement in Developing Countries. The event will be in-person at the Global Impact Investors Network annual conference ([GIIN Impact Forum](https://www.impactinvestorforum.org/)) at the Bella Center in Copenhagen on __Thursday October 5__ in side event room 4.

Please be aware, the meeting room is within the GIIN Impact Forum at the Bella Center, therefore participants need to be registered at the GIIN Impact Forum to gain access to the room.

The agenda for the event includes a presentation of key blended finance developments followed by Q&A and open discussion. The Denmark MFA will present its initiatives in two of the most important areas of blended finance and private investment mobilization: (i) diving into the reform of the Danish DFI (IFU) as presented by the prime minister at UNGA (ii) public sector issuance of guarantees to create investment assets that meet investors’ fiduciary and regulatory risk-return investment obligations.  Please contact Convergence with any requests for content.

GIIN Impact Forum: Convergence and Danish MFA Blended Finance Side Event

Join us for a session dedicated to blended finance and private investment mobilization for the SDGs and Paris Agreement in Developing Countries.

GIIN Conference Convergence Blended Finance Side Event

__Blended Finance and Private Investment Mobilization Update, September 28th, 8:30am – 10:00am EST__

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The session is designed for and dedicated to staff from Ministries of Foreign Affairs, development agencies and Ministries of Finance at the 30 OECD DAC members who are interested in increasing investment in Low and Middle-Income Countries (LICs & MICs) to achieve the SDGs and Paris Agreement objectives. Please register for the event below, and forward to any of your interested colleagues in these organizations.

Convergence invites you to a 90-minute webinar dedicated to blended finance and private investment mobilization. 

The webinar aims to achieve the following objectives:

- Provide an update on the leading developments in blended finance and private investment mobilization in 2023
- Summarize and operationalize the new 2023 OECD DAC rules for Official Development Assistance and private investment mobilization
- Identify and describe the leading global initiatives and upcoming events in blended finance and private investment mobilization
- Summarize the current World Bank Group Private Sector Investment Lab initiative
- Identify and agree the value of instituting quarterly convenings for the OECD DAC community (and philanthropic foundations) to advance blended finance good practices to increase levels of investment for SDG and climate impact
- Agree the best events and activities Convergence can undertake in 2023-24 to support OECD DAC members and philanthropic foundations for blended finance and private investment mobilization
- Convene a virtual networking event to allow all new and continuing staff at OECD DAC members to engage with each other – there has been immense turnover in blended finance / private investment mobilization roles and this post-summer event is a good way to connect and re-connect practitioners

*This session is exclusive to Development Agencies, Ministries of Foreign Affairs/International Development.*

If you have any questions or suggestions, please contact comms@convergence.finance,  Mira.Minkara@convergence.finance or Chris.Clubb@convergence.finance

Blended Finance and Private Investment Mobilization Update

Join us for a 90-minute webinar dedicated to blended finance and private investment mobilization.

Member Training: Blended Investments in Renewable Energy

__Member Training: Blended Investments in Renewable Energy, September 21st, 9am – 10:30am EST__

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As countries worldwide set ambitious targets to achieve Net Zero, adopting renewable and clean energy sources is high on the agenda. Despite this, emerging economies with high potential for renewable energy development such as solar and wind, face financing challenges to the implementation of these solutions.

Our 90 minute session will cover:
- An assessment of the current global renewable energy landscape, with a spotlight on developing economies.
- Convergence data trends on blended finance for global renewable energy investments: what is happening where?
- Insights from the [Climate Policy Initiative](https://www.climatepolicyinitiative.org/) on what barriers exist for investors and how policy and blended finance can be used to structure financial products that address these barriers.
- How to blend capital and assess risk at the fund-of-fund, fund, facility and/or project-level.
- We will also explore three specific renewable energy transactions in detail:
  - [AllianzGI](https://www.allianzgi.com/) and the [Emerging Markets Climate Action Fund](https://emcaf.allianzgi.com/)
  - [DBSA](https://www.dbsa.org/) and the [Climate Finance Facility](https://www.convergence.finance/deal/c8014dcb-ae24-4ce5-a8b8-27d7a46ef661/view)
  - [CrossBoundary](https://www.crossboundary.com/) and the [CrossBoundary Energy Fund](https://www.convergence.finance/deal/a0337000008gKkfAAE/view)

After this Member Training you will walk away with a high-level understanding of the renewable energy sector, the barriers to investment as well as examples of successful blended finance transactions and their impact in developing markets.  

*Space is limited to ensure an intensive and practice-driven learning experience. Each Convergence member organization has two complimentary seats in each training. To claim these seats select 'Register' above. From Eventbrite, choose 'Tickets' and enter the promo code you received by email to receive free access. Non-members can register for a fee of USD100.*

Join us for analyses on the renewable energy industry to date and how blended transactions are being structured in the sector and their impact.

Convergence Members Breakfast & Networking in New York

__Convergence Member Breakfast and Networking in New York, Monday, September 18th, 8:30-10:00am EST__

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Join this invitation-only breakfast and networking event in New York, taking place alongside the United Nations General Assembly.

Attendees will receive an exclusive preview of Convergence’s flagship publication, The State of Blended Finance 2023, and have ample time to connect with the Convergence team, our members, and our broader network.

Registration is open on a first-come-first-serve basis, with a limit to 2 persons per organization.

Whilst in New York, the Convergence team also looks forward to meeting with our members in-person from September 18 through 20. Please reach out directly to take advantage of this opportunity to chat in-person. Meetings will be scheduled on a first-come-first serve basis.

Itinerary:
- 8:15AM-8:30AM - Registration
- 8:30AM-8:35AM - Welcome remarks
- 8:35-8:55AM - Preview key findings of the State of Blended Finance 2023 & Convergence updates
- 8:55-9:00AM -  Closing remarks
- 9:00-10:00AM - Networking

Convergence Members Breakfast & Networking (New York)

Join us for breakfast and networking in New York.

Breakfast & Networking in New York

In partnership with [Roots of Impact](http://www.roots-of-impact.org/) and the [Center for Sustainable Finance and Private Wealth (CSP)](https://www.csp.uzh.ch/en.html) at the University of Zurich this is an actionable, practice-driven executive program.

The program aims at empowering public, philanthropic and private sector funders to collaborate effectively to achieve the Sustainable Development Goals. A special ingredient are solutions that demonstrate how to enable high-impact enterprises with market-based solutions to scale and deliver positive impact in a sustainable way – a bottom-up approach. Our more than 160 IIBF alumni to date come from major organisations across the globe, e.g. UNDP, USAID, SDC/DEZA, GIZ, Global Affairs Canada, IFC, SECO, FAO as well as renowned foundations or NGOs such as UNICEF, Shell Foundation, Aqua for All, SOS Children’s Villages, and Refugee Investment Network.

IIBF runs as an open program (based upon application) at its home base at the University of Zurich, Switzerland. It builds on the extensive academic and practical expertise of Roots of Impact, Convergence and the Center for Sustainable Finance and Private Wealth (CSP).

Impact Investment & Blended Finance Executive Program 2023

This actionable, practice-driven executive program aims at empowering public, philanthropic and private sector funders to collaborate effectively to achieve the Sustainable Development Goals.

Executive program for impact investment and blended finance

nairobi breakfast eb

__Convergence Member Breakfast in Nairobi, Tuesday, September 5th, 8:00am - 9:00am EAT__

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As part of Africa Climate Week, Convergence invites you to a networking breakfast with members and partners on Tuesday, September 5th. Come meet with impact investors, institutional investors, donors, development banks, and sponsors of blended finance deals amongst other stakeholders. This event will be an opportunity to connect with like minded individuals/institutions engaged in blended finance, make new contacts, exchange ideas, and more.

Registration is open on a first come, first served basis, with a maximum of two representatives per organization.

Convergence Member Breakfast (Nairobi)

Join us for a member breakfast and networking in Nairobi.

Member Breakfast in Nairobi

Convergence Eventbrite

You're invited on __August 31st at 9:00am SGT__ for a virtual presentation of Convergence's recent data brief, [Blended Finance in the Association of Southeast Asian Nations (ASEAN)](https://www.convergence.finance/resource/blended-finance-in-the-association-of-southeast-asian-nations-asean/view).

Convergence’s Historical Deals Database has recorded 107 blended transactions targeting ASEAN in part or in full, representing aggregate committed financing of US $20.7 billion.

ASEAN is primed to benefit from an increase in catalytic capital. Its commitment to net zero, the availability of financing, and its focus on sustainability, combined with its high projected economic growth, means that blended finance can be an effective tool in solving some of the challenges facing the region. Join us as we discuss the trends, opportunities, and challenges of blended finance in ASEAN. The presentation will include a panel discussion with leading investors in the region.

__AGENDA__

9:00-9:05AM - Opening Remarks with Ritesh Thakkar, Senior Advisor, Asia Pacific

9:05-9:20AM – Data brief highlights, Convergence Content Team

9:20- 9:45AM – Panel discussion with leading investors

9:45-9:55AM – Q&A

9:55- 10:00AM – Closing remarks

Virtual Presentation: Blended Finance in ASEAN

Join us for a virtual presentation of Convergence's recent data brief, Blended Finance in the Association of Southeast Asian Nations (ASEAN)

Blended Finance in ASEAN

Deal Connect

Join us for an informative webinar that will connect you to relevant blended finance investment opportunities in emerging markets. During this interactive session, Convergence members will share details about their investment opportunities that are listed on our live deals database. This is a great opportunity to explore new and unique transactions and learn from developments in the broader blended finance ecosystem. 

Whether you're a seasoned investor or just starting out, this webinar is tailored to everyone interested in discovering promising new ventures in emerging markets.

Mark your calendar for August 22, 2023, from 9-10 am EST, as we present three compelling deals from our live deals database:

- __Green Impact Earth Fund (GEIF) by Blue Orchard:__ This is a global Climate Focused Funds of Funds strategy that offers investments into innovative private equity, sustainable real assets, and private debt funds   in emerging and frontier markets, with a focus on addressing climate     change, water protection, and biodiversity.
- __Menterra Social Impact Fund 2 by Setuka Partners:__
  Menterra Social Impact Fund 2 aims to tackle critical issues in agriculture, healthcare, and education in India through private investments that generate both commercial returns and profound social impact.
- __The Nutritious Foods Financing Facility (N3F) by Incofin:__
  The Nutritious Foods Financing Facility (N3F) is an open-ended debt fund     that provides loans and technical assistance to SMEs supporting nutritious, safe foods in Sub-Saharan Africa.

*This webinar series is exclusive to investors registered on the Convergence platform.*


Join us for an informative webinar that will connect you to relevant blended finance investment opportunities in emerging markets.

Australia just released its 2023 [Development Finance Review](https://www.dfat.gov.au/sites/default/files/development-finance-review-2023.pdf) (DFR), and the document signals to development professionals and investors alike Australia’s approach to boosting the economies of the Indo-Pacific region.

Economic growth, stability, and resilience in the Indo-Pacific region matter for the global economy. And tackling these issues—encapsulated in the Sustainable Development Goals (SDGs) and the Paris agenda—solely with public funding is unrealistic. There is not enough fiscal space in these economies, nor sufficient donor funding from the wealthier nations of the world, to deliver on development goals. Turning to private sector investors won’t work on its own either; the fiduciary investors of the world will not expose their capital to excess risk in developing economies. Part of the answer must include the strategic use of catalytic funds to attract private sector investment toward the SDGs—blended finance. But for the broad community of private sector investors who do not interact with governments or donors regularly, securing the catalytic funds to put together a blended finance transaction can be an opaque process. 

The official donor agencies of most countries do not have a front door that prospective blended finance sponsors can walk through to discuss partnering on transactions. Many donor agencies, if they support private sector-led development, channel funds directly through their countries’ bilateral development banks, or to the multilateral development banks in which they hold shares. If donor agencies engage in blended finance directly, [it may be episodic, rather than part of an explicit strategy](https://www.convergence.finance/resource/the-state-of-blended-finance-2021/view) with a known product line and budget. 

This is why Australia’s DFR is important. The review makes official that the Department of Foreign Affairs and Trade (DFAT) should have a front door for the investment community and instructs DFAT to hang a shingle signaling exactly what is on offer and toward what end. 

Building on this announcement, DFAT has a singular opportunity to ramp up its work to organize and direct capital to meet the Indo-Pacific’s urgent development priorities. And the DFR’s direction aligns well with notable [best practices for donor governments engaging in blended finance](https://www.convergence.finance/resource/best-practices-for-donor-governments-engaging-in-blended-finance/view):
- __Donor nations should determine their blended finance objectives and design blended finance offerings accordingly.__ The DFR identifies early-stage funding as a pinch point for both SMEs and infrastructure projects in the region. DFAT already funds the [Emerging Markets Impact Investment Fund](https://emiif.fund/) (EMIIF), which invests in financial intermediaries, and can reach many more SMEs than DFAT could support directly with a combination of capital and technical assistance. The DFR calls for rebranding EMIIF as Australian Development Investments and growing it to A$250 million. Similarly, DFAT is a funder of the [Private Infrastructure Development Group](https://www.pidg.org/) (PIDG), a highly catalytic multidonor entity that is often the first investor into infrastructure projects, encouraging co-investors to follow. The DFR indicates that Australia intends to ramp up support for PIDG. And, finally, the DFR notes DFAT support to Convergence’s own [Design Funding](https://www.convergence.finance/design-funding) activities, which operate at the earliest conceptual stage of blended structures, pushing forward potentially investible ideas into the market.
- __Donor nations should tailor blended finance programs to their country’s unique domestic economic and business contexts.__ The DFR calls for a strategy of partnering with Australian philanthropies and impact investors in the first instance, to ripen investible opportunities to a point where mainstream investors, including the major Australian institutional investors who have yet to engage meaningfully in the region’s developing economies, can join in.
- __Donor nations must have the internal capacities and resources to execute on their plans.__ The DFR identifies Australia’s strengths in gender and climate and directs these skills to be explicitly built into its blended finance activities; it notes the need to designate a specific office within DFAT (a front door!) to take on blended finance and interact with the private sector; and it calls for enhanced measurement and reporting on outcomes.

These points matter not only for accountability to the taxpayer but also to coax private investors into the water over time. Others think so too. The Australian Sustainable Finance Initiative (ASFI) represents Australian financial institutions (major banks, superannuation funds, insurers, asset managers, and financial services firms) committed to sustainable investing. ASFI [reacted to the DFR](https://www.asfi.org.au/asfi-news/93mg7edflz297uhdk9go8quz4tv9uk) by reiterating its hope for a national center for blended finance at some point—a door with visible signage. 

The DFR is an excellent start. Equipping DFAT with a clear mandate and strategy for blended finance opens a door so philanthropic and private investors can participate more readily in investment opportunities that achieve the SDGs and climate change objectives in the Indo-Pacific region. Getting this right would mean a step-function increase in crowding in private sector money.

Australia's 2023 Development Finance Review (DFR), outlines Australia’s approach to boosting the economies of the Indo-Pacific region.  Economic growth, stability, and resilience in the Indo-Pacific region matter for the global economy.

Blended finance for economic growth in the Indo-Pacific

Use blended finance to foster economic growth, stability, and resilience in the Indo-Pacific

Given the multitude and variety of climate finance flows, a single global measurement tool is unavailable. As data can be sliced, aggregated, and analysed differently, it is important to take a comparative look at climate financing. In our [2022 State of Blended Finance report](https://www.convergence.finance/resource/state-of-blended-finance-2022/view), we explored one piece of the bigger picture by taking a closer look at blended finance transactions. Using data from our Historical Deals Database (HDD), we analyzed a $108 billion market composed of 359 blended climate-focused deals in developing countries1. Since the HDD only includes blended transactions, the trends we saw do not account for the entire market. Because of this, comparing our findings to other data sets similarly focused on climate financial transactions can be helpful.

Difficulties arise, however, in making direct comparisons since different organizations focus on different segments of the market. For example, [Tameo](https://tameo.solutions/market-intelligence) looks at investments made specifically through private asset impact funds, while the [Organization for Economic Cooperation and Development](https://www.oecd.org/environment/climate-finance-provided-and-mobilised-by-developed-countries-in-2016-2020-286dae5d-en.htm) (OECD) considers only climate financing flows from developed to developing countries. Additionally, the [International Renewable Energy Agency](https://www.irena.org/Publications/2023/Jun/Tracking-SDG7-2023) (IRENA) very narrowly looks at financial transactions that achieve indicator 7.a.12 of the Sustainable Development Goals (SDGs). Meanwhile, data from the [Climate Policy Initiative](https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2021/) (CPI) consists of primary capital flows directed toward low-carbon and climate-resilient development interventions, and the [United Nations](https://unctad.org/topic/investment/world-investment-report) data we highlight focuses solely on private climate finance transactions. 

While different data sources may explain some of the variability in overall findings, it is still useful to understand additional factors within the data sets that could lead to seemingly contrasting results. The sections below will attempt to explain how the findings in the 2022 State of Blended Finance compare to other publications in terms of overall climate finance trends.

__Market trends in climate financing__

In the 2022 State of Blended Finance, we found an overall downward trend in blended climate aggregate financing from 2016-2018 to 2019-2020, from $36.5 billion to $14 billion, respectively. Between these periods, the average size of climate-focused blended finance deals also decreased. Figure 1 below shows how between 2016-2018, deal counts remained relatively stable, and deal size averaged $367 million.3 From 2019-2021, deal count fluctuated to reach a high of 38 in 2020. However, the average deal size fell to $182 million, a 50% decrease from the previous three years. The decline can be partly attributed to private investors investing in smaller renewable energy projects on average and the size of their investment commitments to these projects also falling on average. The average size of public investors’ commitments to blended climate transactions also decreased between these time periods. 

![sobf review fig1](//images.ctfassets.net/4cgqlwde6qy0/5PJtbz8MPoWdCrxqSqy22R/06221878bd833bf3ac951fd6b3578ad8/sobf_review_fig1.png)

IRENA has similarly [proposed](https://www.irena.org/Publications/2023/Jun/Tracking-SDG7-2023) that international public financial flows supporting clean energy in developing countries started decreasing before the COVID-19 pandemic and continued to do so through 2021. IRENA considers a few factors in explaining this decrease. One is that flows from public actors are inconsistent and variable year-over-year. In this case, a significant drop in hydropower public investment contributed to the overall decrease. A second factor suggests that despite the decrease beginning earlier, the COVID-19 pandemic caused an even larger shift in public funds in 2020. This explanation was also explored in the 2022 State of Blended Finance report as a reason for the decrease in blended finance funding.

On a broader scale, looking beyond blended transactions or those tied to Indicator 7.a.1, the OECD [found](https://www.oecd.org/environment/climate-finance-provided-and-mobilised-by-developed-countries-in-2016-2020-286dae5d-en.htm) that climate finance mobilized by developed countries to developing countries has actually increased annually since 2016. The increases have largely been driven by multilateral and bilateral public finance. The OECD data suggests that within public finance instruments (including multilateral and bilateral), non-concessional loans accounted for approximately 15% of total climate financing. This is in contrast to the Convergence HDD, which excludes transactions without a concessional component and may help explain the differing trends.

CPI similarly [shows](https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2021/) that total climate financing flows have been steadily increasing since 2011-2012, reaching a high of $632 billion in 2019-20. Part of this difference can be explained by looking at the regional focus of data within the HDD. Given that deals in the HDD focus on transactions within developing countries, the data excludes those that occur in other regions. In the CPI report, a significant portion of climate financing comes from strong domestic spending in China, which is not captured in the HDD. More specifically, CPI found that domestic climate flows in East Asia & Pacific accounted for $270 billion, or approximately 43% of total 2019-2020 tracked global climate investments. Of that amount, over three quarters of the investments were concentrated in China. In contrast, within the HDD, between 2019-2021, approximately 27% of climate deals were in West & East Africa, 13% were in South America, and 10% in South Asia.

__Underrepresentation of adaptation deals__

There is general agreement within different data sets on the dominance of mitigation over adaptation financing, even if the proportion of transactions vary. For example, we can compare the HDD’s findings (14% adaptation-focused); the United Nations (UN) World Investment [Report](https://unctad.org/topic/investment/world-investment-report) 2022 (5%); the Climate Policy Initiative (CPI) [findings](https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2021/) (7%); and the Organization for Economic Cooperation and Development (OECD) [data](https://www.oecd.org/environment/climate-finance-provided-and-mobilised-by-developed-countries-in-2016-2020-286dae5d-en.htm) (34%) to clearly see the overreliance on mitigation strategies and the need for greater levels of private investment in adaptation transactions. 

Due to their steep upfront costs, long investment timelines, and lack of clear revenue streams, adaptation investments more often fall in the public financing realm. This is apparent when we consider the data sources that primarily include private financing levels, such as the UN [report](https://unctad.org/topic/investment/world-investment-report) that shows the lowest levels of adaptation financing (5%); without accounting for public contributions, adaptation financing is particularly underrepresented. Likewise, the prevalence of private sector investments in the CPI data can explain the lower proportion of adaptation transactions (7%). CPI also states almost all adaptation finance tracked in their study was funded by public actors.

The OECD [data](https://www.oecd.org/environment/climate-finance-provided-and-mobilised-by-developed-countries-in-2016-2020-286dae5d-en.htm) also supports the importance of public financing in adaptation. The report analyses flows from developed to developing countries, which tend to have a higher proportion of investments made by public sector entities. Specifically, public climate finance accounts for just over half of the OECD investment data. With a higher representation of public financing, there would be a higher proportion of adaptation transactions.

In general, the findings bolster the 2022 State of Blended Finance conclusion: adaptation finance is underdeveloped and requires expansion and acceleration. Overall, HDD climate data (see Figure 2 below) shows a clear imbalance between pure mitigation versus adaption flows, the former attracting $33.4 billion and the latter attracting only $3.8 billion. 

One way to increase adaptation financing is to better incorporate adaptation goals into broader investment themes. In all climate investments captured by the Convergence HDD, hybrid investments (combinations of mitigation and adaption) represent under one-third of total climate financing. There are opportunities to consider adaptation in other investment cross-sections, such as non-energy related infrastructure projects. As discussed during the [2023 San Giorgio CPI meetings](https://www.climatepolicyinitiative.org/wp-content/uploads/2023/03/SGG9-Summary.pdf), another way is to create a standardized metric that allows progress to be measured, like how carbon dioxide equivalent is used for mitigation. Also discussed was the possibility of using existing successful structures, such as energy service companies (ESCOs), as a model for adaptation initiatives. ESCOs have proven to be an effective method of encouraging energy savings; they may provide inspiration to search for adaptation solutions. 

__Key Takeaways__

In revisiting the 2022 State of Blended Finance and comparing it to other data sources, there are some key takeaways in how we look at climate finance flows.

- While climate deal count increased on average from 2016-2018 to 2019-2021, average deal size shrank, partly due to private investors investing in smaller renewable energy projects on average, and the size of their investment commitments to these projects also falling on average.
- Market trends in the HDD differ from those in the OECD and CPI reports, which show climate financing flows increasing annually, possibly because of the narrower regional focus and the exclusion of climate transactions without a concessional component in the HDD.
- The data sources agree on the under-representation of adaptation financing. Increasing adaption finance may be possible by better incorporating adaptation goals into broader investment themes and creating a standardized metric to measure progress.

Current estimates place the global annual investment required to meet the climate goals set out by the Paris Agreement at $5 trillion, with at least [$1.6 trillion required per year in developing countries alone](https://blogs.worldbank.org/voices/how-can-we-scale-finance-needed-climate-action). To meet the challenge of climate change head-on, we need a greater commitment to climate financing and a continuous willingness to provide concessional financing in a way that benefits developing countries. By analyzing different markets and factors within climate deals, we can better understand where there are gaps and where there are opportunities. No one data set can provide a comprehensive outlook, but each can tell us something different about how we, as a collective, can better direct our funding to meet the climate change challenge. 

![Chart_Global Climate Blended Finance Flows](//images.ctfassets.net/4cgqlwde6qy0/6Ok4ZIYCoNK3Z22Gsz3jJd/57aec6741a3604d7304deb5e03f241ed/Chart_Global_Climate_Blended_Finance_Flows_v1_1_.png)

*1. For an overview of the available climate investment data within the Convergence HDD as of October 2022, refer to Figure 2.* 
*2. Indicator 7.a.1 measures international financial flows to developing countries in support of clean energy research and development and renewable energy production, including in hybrid systems.* 
*3. Transactions were considered climate-focused based on their alignment to select SDGs: SDG 7 (Clean Energy), SDG 11 (Sustainable Cities), SDG 13 (Climate Action), SDG 14 (Life Below Water) and SDG 15 (Life on Land). Note the data presented in Figure 1 is updated as of June 2023 and therefore does not exactly align with the data presented in the 2022 State of Blended Finance.*

Data review: State of Blended Finance 2022, a comparative look at climate financing

Climate Financing – Beyond the 2022 State of Blended Finance

*This op-ed was originally published on [Devex](https://www.devex.com/news/opinion-4-ways-dfis-can-mobilize-more-private-capital-for-the-sdgs-105612?utm_source=social&utm_medium=post&utm_campaign=devexoped).*

*__Co-authored by Joan Larrea, CEO, Convergence and Kusi Hornberger, Partner, Dalberg.__*

We are far short of achieving the Sustainable Development Goals by 2030. Public and philanthropic institutions alone cannot fill the current [$7 trillion annual financing gap](https://www.ohchr.org/en/press-releases/2022/10/trillions-needed-close-finance-gap-sustainable-development-goals-says-un#:~:text=%E2%80%9CThe%20second%20problem%20is%20grossly,achieving%20the%20Sustainable%20Development%20Goals.) — the private sector must step up. But what will incentivize the sector to do so, and how can the development sector ensure the funds are targeted to meet the SDGs?

Development finance institutions, or DFIs, can answer these questions — if they recognize how their potential to contribute has changed. Here are four ways DFIs can strengthen their ability to promote catalytic investment.

### 1. Increase blended finance windows to catalyze investments

Concessional funds from donors are scarce and thus must be used fully and strategically to crowd in other types of capital. Currently, blended finance windows (i.e., money donors set aside for blended finance) are woefully underused — losing opportunities to draw in third-party capital to fill development needs.

In 2020, [1.6%, or approximately $1.6 billion](https://www.eib.org/attachments/mdb-dfi-working-group-blended-concessional-finance-private-sector-joint-reoprt-dec-2021.pdf), of all participating DFI private financing was at concessional or submarket rates. This is a huge missed opportunity to catalyze investments; in fact, in a typical blended finance fund, each dollar of concessional capital [leverages $4 of commercial capital](https://www.convergence.finance/news-and-events/news/4cC8kVJXvOFZDVxGQ6HLNH/view), of which less than half is private sector investment capital.

Yet, according to Convergence’s database of historical blended finance transactions, DFIs are putting forward the concessional capital in less than a tenth of blended finance transactions. If scaling mobilization is the goal, donor governments must push DFIs to do more, guiding them away from acting like risk-averse investment banks and encouraging them to provide more risk-tolerant catalytic capital in many more blended finance transactions.

DFIs must be incentivized to proactively seek deals in social infrastructure, climate adaptation, and other projects. And further, take subordinated debt positions in these blended finance structures to best catalyze private capital and achieve development impact and financial return.

### 2. Seek ecosystem additionality and not just financial leverage
DFIs should broaden their definition of “additionality” to “ecosystem additionality” — and recognize the broader impact they bring beyond financial leverage — which can create market signals and remove systemic barriers that change behaviors. For instance, learnings from a blended finance transaction can bring benefits broader than the transaction itself.

Being driven by ecosystem additionality may mean not only selecting transactions that, in the first instance, promise to deliver higher leverage or draw in larger investors, but also supporting smaller blended finance transactions that may have greater potential to transform markets.

One example is [IDB Lab](https://www.devex.com/organizations/idb-lab-129762)’s $1 million loan, deployed in 2016, to [Pomona Impact](https://pomonaimpact.com/), then a new impact fund with a first-time manager investing in risky markets in Central America. IDB Lab’s loan was catalytic, with concessionary rates, allowing Pomona to achieve success in only two years with investments in organizations like EcoFiltro, Uncommon Cacao, and Yellow Pallet.

omona demonstrated that impact investing in Central America was feasible, raising and launching its first $20 million fund. Currently it deploys capital into high-impact social enterprises across Central America with more than a dozen private and public investors.

Many new impact funds, having observed Pomona Impact’s success, are entering or considering investments in the region — investments that might not otherwise have been made.

### 3. Interact and collaborate more with private catalytic investors
DFIs can increase and strengthen their catalytic investments by intentionally seeking out and collaborating with other catalytic investors, rather than partnering by chance or on a transaction-by-transaction basis.

DFIs should seek ways to both co-invest and share learnings that strengthen catalytic investments and outcomes. To clarify, we do not suggest DFIs collaborate with other catalytic investors to mitigate their own risk, but instead share lessons learned, tools, and specialized expertise.

Greg Neichin, managing director of the family office [Ceniarth LLC](https://ceniarthllc.com/), suggests matching catalytic investors systematically through a “[DFI capital gap dashboard](https://newventurefund.org/wp-content/uploads/2022/11/Advancing-Practice-in-Catalytic-Capital_The-Scaling-Role.pdf)” that provides both DFIs and catalytic capital investors with ways to efficiently source deals to their mutual benefit.

Such an intentional partnership was [recently announced](https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=26416) between the [International Finance Corporation](https://www.devex.com/organizations/international-finance-corporation-ifc-44392) and The Rockefeller Foundation. The [Rockefeller Foundation](https://www.devex.com/organizations/rockefeller-foundation-19719) has committed $150 million in catalytic capital to mobilize up to $2 billion in private investments to de-risk private investments in distributed renewable energy solutions across sub-Saharan Africa. The demonstration effects of this effort will illustrate the potential unlocked when catalytic investors choose to work together.

### 4. Report better on blended finance use and impact
[Publish What You Fund](https://www.devex.com/organizations/publish-what-you-fund-46485)’s [2023 DFI Transparency Index](https://www.publishwhatyoufund.org/app/uploads/dlm_uploads/2023/02/DFI-Transparency-Index-Report-January-2023.pdf) indicates that DFIs generally are insufficiently transparent. Most do not publish evidence of impact, financing flow data, or proof of accountability to the communities they invest in.

Data reporting is crucial to understanding typical deal terms, the rationale for using concessional funds, and disaggregated information on types of capital used. Increased reporting reduces information asymmetries that prevent private investors from accurately assessing investment and project risks, lead to mispricing of risk and, ultimately, a higher cost of capital in the countries that most need it.  

IFC was ranked the most transparent nonsovereign DFI in the assessment, highlighting their robust environmental, social and governance, or ESG, reporting, accountability mechanisms, and disclosure of high-risk financial intermediary, or FI, subinvestments. For example, in 2020 IFC launched the [green equity approach](https://www.ifc.org/wps/wcm/connect/05541643-0001-467d-883c-5d7a127ffd57/IFC+Greening+Report+Sept+2020.pdf?MOD=AJPERES&CVID=nisvaOC&ContentCache=NONE&CACHE=NONE) that precludes equity investments in FIs that do not have a plan to phase out coal investments by 2030. In addition, IFC is the only major DFI that shares the percent of project cost that is covered by [concessional terms](https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/bf/bf-details/concessionality-calculation) in their project-level data reporting. Any DFI can adopt and benefit from these practices that help mitigate perceived investment risk and ensure that all investments align with their values and mandates.

DFIs must act now. The SDGs' environmental, social, and economic outcomes cannot be achieved unless DFIs use catalytic financing to push the boundaries of where markets can work. DFIs must rethink how they will provide capital to fulfill their mandate to foster private sector activity where it is most needed, and the four recommendations here are a good place to start.

Opinion: 4 ways DFIs can mobilize more private capital for the SDGs

*Figure 1: Market size and growth of blended finance in ASEAN*

In 2022, the Association of Southeast Asian Nations (ASEAN)* was one of the fastest growing regions in the world, with an annual growth rate of [approximately 5.5%](https://www.aseanbriefing.com/news/asean-economic-outlook-2023/). While growth is expected to slow slightly in 2023, it is still forecasted to be higher than the global average, with Vietnam, the Philippines, and Cambodia expected to have [real GDP growth](https://www.oecd.org/dev/asia-pacific/economic-outlook/Overview-Economic-Outlook-Southeast-Asia-China-India.pdf) above 5%. Despite this, the region continues to face numerous economic challenges, such as the energy infrastructure gap. To power its manufacturing and meet rising consumption needs, ASEAN countries must invest approximately [$490 billion](https://www.adb.org/publications/integrated-and-smart-asean) cumulatively between 2025 and 2030. This gap will be more of a challenge to close in the lower income countries in the region. Other challenges, such as the region’s vulnerability to climate change, in combination with global macroeconomic conditions including higher inflation rates, a high debt burden, and the Russian invasion of Ukraine, mean there is a need to use scarce public and philanthropic funding in a catalytic way. 

Blended finance can help address these challenges by de-risking investments in areas critical to achieving the Sustainable Development Goals (SDGs) in the region. The latest [Data Brief](https://www.convergence.finance/resource/blended-finance-in-the-association-of-southeast-asian-nations-asean/view) from Convergence analyzes 107 blended transactions targeting ASEAN in part or in full, representing aggregate committed financing of US$20.7 billion.

Key takeaways from the Brief:

__Renewable energy is a key sub-sector in ASEAN:__ Within the ASEAN energy sector, which accounts for 41% of ASEAN deals in Convergence’s historical deals database (HDD), renewable energy is currently the largest sub-sector by deal volume (33%). The [Cambodia Solar Project](https://www.adb.org/projects/50248-001/main) is one example within this category. The project involved constructing and operating the first utility-scale solar power project in Cambodia with a capacity of 10MWp DC. The Asian Development Bank (ADB) provided A and B loans and concessional debt through the Canadian Climate Fund for the Private Sector in Asia. Recently, ASEAN countries have [agreed](https://www.spglobal.com/commodityinsights/en/ci/research-analysis/which-asean-countries-will-be-the-frontrunners-to-decarbonize.html) to increase the share of renewable energy in installed power capacity to 35% by 2025, with eight out of ten members committing to net zero by 2050, and one by 2060.

![ASEANbrief fig2](//images.ctfassets.net/4cgqlwde6qy0/6G9nVbSNMjQjlCbCwK0pcM/9cae4006ba71a6c475df593aa4cbf823/ASEANbrief_fig2.png)
*Figure 2: ASEAN transactions by sector*

__Indonesia is ASEAN’s largest blended finance player by deal count and financing:__ Indonesia (42 transactions) is the most active blended finance market in the ASEAN region, accounting for more than a third (39%) of all the blended finance deals in the region. Indonesia is followed by the Philippines (28), Vietnam (28), and Cambodia (25). The breakdown of aggregate financing received by individual ASEAN countries mostly matches the breakdown by deal count. Cambodia, however, accounts for lower aggregate financing among ASEAN countries when compared to the number of transactions. This reflects smaller transaction sizes in Cambodia when compared to other countries, including Myanmar and Thailand, which have a lower deal count but higher deal size and financial flows. Note the HDD has not captured transactions in Singapore or Brunei.

![ASEANbrief fig3](//images.ctfassets.net/4cgqlwde6qy0/3iT4e2WmyEwhETj0tbya2j/dfb17caadf74c26c7153b1df636b3edf/ASEANbrief_fig3.png)
*Figure 3: Deal count and aggregate financing by ASEAN country*

__Commercial investors are more active as deal sponsors in ASEAN:__ Commercial investors (39%) have been more active as deal sponsors in ASEAN-focused transactions than in the global market. During an interview with a blended finance practitioner, it was suggested that commercial investors have more capacity and capability to scale private sector engagement in the region. Meanwhile, Development Finance Institutions (DFIs)/Multilateral Development Banks (MDBs) and impact investors have been less active (24% and 9% respectively). The former can play a role in providing concessionary funding, but often participate in blended finance deals on commercial terms. 

![ASEANbrief fig4](//images.ctfassets.net/4cgqlwde6qy0/4cacplKwG49GFlFctBZOFC/d9dc151d260b1077c5c713d616fa10bf/ASEANbrief_fig4.png)
*Figure 4: Deal sponsors of ASEAN transactions by type of organization*

__There are opportunities and challenges for blended finance in ASEAN:__ Throughout our interviews, several themes became apparent regarding challenges and opportunities for blended finance in ASEAN. One challenge is the long runway between a deal’s conception and its launch. This is partly due to the complex and unique structure of each individual transaction. Different organizations may also have different timelines and objectives, which can cause delays in decision-making. 

Scalability and a lack of bankable projects in the region are additional challenges. Several interviewees noted the difficulties of finding transactions of an adequate size that fit within the mandates of their organizations. Macroeconomic challenges such as supply chain issues and currency volatility can also complicate committing to regional development projects for investors.

However, there are important opportunities for blended finance in the region. For example, sustainable debt is becoming an important market, especially with the recent [increase](https://www.climatebonds.net/resources/reports/asean-sustainable-debt-market-2021#:~:text=The%20sustainable%20debt%20market%20in,6bn%20in%202020.) in the issuance of green, social, and sustainability (GSS) bonds and the growing popularity of the blue economy. Since the mandates of many DFIs and MDBs in the region also do not currently support the large-scale use of catalytic funding, there is an opportunity for these institutions to increase their use of capital in a more catalytic way.

Moreover, blended finance will be essential to achieving the transition to net zero by 2050. The cost of the transition is estimated at over [$9 trillion annually](https://www.adb.org/annual-meeting/2023/events/scaling-blended-finance-support-net-zero-transition-asia#:~:text=Asia%20accounts%20for%20nearly%20half,%249%20trillion%20annually%20through%202050.) through to 2050, with an additional need to fill the current annual funding shortfall of $3.5 trillion and to reallocate $1 trillion of current spending from high to low emission assets. Catalytic financing can help to crowd in private investments for otherwise risky projects in the energy sector, allowing the region to move closer to its target.

Overall, ASEAN is primed to benefit from an increase in catalytic capital. Its commitment to net zero, the availability of financing, and its focus on sustainability, combined with its high projected economic growth, means that blended finance can be an effective tool in solving some of the challenges facing the region.

**Member states include Brunei, Cambodia, Lao PDR, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.*

__Become a [member](https://www.convergence.finance/membership) and read the [full brief](https://www.convergence.finance/resource/blended-finance-in-the-association-of-southeast-asian-nations-asean/view).__

Blended finance in the Association of Southeast Asian Nations (ASEAN), sustainable development goals (SDGs)

Can blended finance help ASEAN meet its regional goals?

Singapore, June 8, 2023 - “Our regional office in Singapore — the Convergence APAC (Asia Pacific) Hub — is a key milestone for us as we grow the field of blended finance to mobilize private capital to attain Sustainable Development Goals (SDG) targets in the region," stated Joan Larrea, CEO of Convergence. 

The APAC Hub will be headed by our Senior Advisor, Asia Pacific, Ritesh Thakkar, a development finance professional with over 18 years of experience in the Asia and Eastern Europe and Central Asia (EECA) region.

“As part of our expansion strategy for Asia, the Convergence APAC Hub will help grow our network and membership and support the implementation of blended finance solutions through our design funding windows such as the Asia Climate Solutions Design Grant.” stated Ritesh Thakkar. “Through our Singapore office, we will build regional stakeholder knowledge and capacity, and bring Asia-centric blended finance data, intelligence, and deal flow to institutions around the world.”

The Convergence database has recorded 206 closed deals targeting the APAC region, representing aggregate committed financing of US$33.18 billion.

With the cost of transitioning to net zero by 2050 estimated at over [$9 trillion annually](https://www.adb.org/annual-meeting/2023/events/scaling-blended-finance-support-net-zero-transition-asia#:~:text=Asia%20accounts%20for%20nearly%20half,%249%20trillion%20annually%20through%202050.), blended finance will be essential in steering investment in the APAC region and worldwide into mitigation solutions. It will also be key for finding investible solutions to adaptation challenges in Asia, which has a significant exposure to physical climate risks.

In addition to the Singapore office, Convergence is headquartered in Canada and has presence in Latin America, Sub-Saharan Africa, and the United States.

Convergence opens Asia Pacific office in Singapore to help grow the field of blended finance and mobilize private capital to attain Sustainable Development Goals (SDG) targets in the region.

Convergence opens regional office in Singapore

*This op-ed was originally published on [Devex](https://www.devex.com/news/opinion-for-blended-finance-to-work-use-strategic-leverage-ratios-105461)*

It is not the role of private capital to solve global development challenges — but it is the responsibility of governments and development finance institutions to ensure that the conditions for private sector mobilization are optimal to generate the finance needed to address the SDGs and the climate crisis. Blended finance is one viable way to make the leap from mobilization talk to action.

The mobilization of private sector resources for the Sustainable Development Goals and climate finance was a key topic at the recent World Bank Spring Meetings in Washington, building on earlier calls for more private sector mobilization from global leaders such as U.S. Secretary of the Treasury [Janet Yellen](https://home.treasury.gov/news/press-releases/jy1033) and U.S. climate envoy [John Kerry](https://www.reuters.com/business/cop/us-climate-envoy-kerry-wants-development-banks-overhaul-plan-by-april-2022-11-15/).

The look to private capital has further intensified with the recent appointment of Ajay Banga to lead the World Bank and its ongoing capital reform agenda. Undoubtedly, Banga’s intention for the World Bank to be a “catalyst for change” starts with bringing in private sector investors for development.

Global private investors are estimated to hold over [$410 trillion](https://guidebookforjustfinancing.com/) in financial assets, with $20.5 trillion alone in low- and middle-income countries. These private pools of capital are arguably the most underutilized resource globally. Practically, 1.4% of private sector financial assets would dramatically advance climate and SDG financing.

To attract the private sector, Banga must position the bank to help de-risk investments since, as he [noted](https://www.devex.com/news/ajay-banga-world-bank-can-be-a-change-catalyst-more-reforms-likely-105259), “the private sector won’t come in when there are risks they don’t understand or a landscape they don’t get.” Although Banga is not the first to emphasize private sector involvement, his understanding of private business could help unlock new methods to achieve increased levels of private sector mobilization.

But what does mobilizing the private sector mean in a practical sense? How do aid dollars translate to private funding and in what quantities? With shrinking capital bases and the need to do more with less, understanding how much can be done based on existing capital is key. Blended finance — the use of concessional public and philanthropic capital to draw in private capital toward sustainable development — will be key in these efforts.

The best way to understand how blended finance can realistically mobilize the private sector is by looking at leverage ratios — the amount of commercial capital mobilized by each dollar of concessional capital.

Recently, Convergence, the global network for blended finance, released an updated [data brief](https://www.convergence.finance/resource/blended-finance-and-leveraging-concessionality/view) on leverage ratios and explains how effective concessional capital has been in blended transactions. The study found that, on average, blended finance transactions have leveraged $4.1 of commercial capital for every dollar of concessional capital, with nearly half of the commercial commitments ($1.8) coming from private sector investors.

The most revealing trend, however, is that Convergence’s brief updates its study from 2018, which also benchmarked ratios at 4 to 1. Five years later and with a substantially larger sample size (72 deals vs. 340 deals), the static nature of this leverage ratio is evidence that donors have much work to do in prioritizing and budgeting private sector mobilization.

A static ratio of 4 to 1 would be fair if it all came from the private sector, but currently roughly half of the commercial money mobilized by each dollar of concessional capital has come from within the development finance system itself, from multilateral development banks, or MDBs, and development finance institutions, or DFIs.

The opportunity to mobilize the private sector is immense, but the allocation of concessional capital must become more strategic. The private sector makes up the majority of capital flows, and domestic financial markets in emerging regions have also grown significantly in size and sophistication, presenting an opportunity to empower the developing world to chart its own sustainable future through deeper financial integration.

In acknowledging the current demands for improved partnerships and collaboration, Convergence and USAID worked with over 100 stakeholders, including private investor groups, donor governments, and philanthropic foundations, to find a solution. From these consultations we devised an [action plan](https://www.convergence.finance/resource/the-action-plan-for-climate-and-sdg-investment-mobilization-high-level/view) to increase mobilization through blended finance.

The action plan lays out a mobilization blueprint for development stakeholders including:
- Becoming more flexible and strategic with catalytic capital.
- Pivoting and adjusting business models to better collaborate and integrate private investors.
- Encouraging MDBs and DFIs to exit senior positions and take more junior positions in blended finance structures to best catalyze private capital.

Mobilization has taken center stage, and with key institutions like the World Bank and other multilaterals being called to do more with their money, blended finance continues to be a viable solution to mobilize capital in an ever-shifting macroeconomic environment.

For leaders like Banga, as the urgency to crowd in the private sector increases, incorporating the many blended finance success stories as guides to achieve higher levels of leverage may prove to be the key to more systemic private sector mobilization.

Addressing SDG and climate financing is not the role of private capital, rather, it is the responsibility of governments and development institutions. If the latter can take strategic steps to prioritize, integrate, and mobilize the former, we will begin to see less conversation and more action, leading to a better and more sustainable future for all of us.

Insights on how systemic private sector mobilization is key to advancing climate and SDG financing.

For blended finance to work, use strategic leverage ratios

Singapore, June 2, 2023 - Today Convergence launched the Asia Climate Solutions (ACS) Design Grant on the sidelines of the 8th Singapore-Australia Annual Leaders’ Meeting, held in Singapore, and under the auspices of the Singapore-Australia Green Economy Agreement. 

The ACS Design Grant will award grants for the design and launch of innovative blended finance solutions that mobilize private capital to sectors critical for climate transition and resilience in developing markets in Asia. Another key objective of the ACS Design Grant is to introduce family offices and foundations to the practice of using their philanthropic capital catalytically. 

The S$5 million (USD 3.7m) ACS Design Grant has secured its first round of funding commitments from the Monetary Authority of Singapore, Australian Department of Foreign Affairs and Trade, The Olayan Group, and UBS Optimus Foundation, with ambitions to grow the grant funding program beyond S$5 million. 

Asia is a critical geography in the fight against climate change. The region accounted for around [half of global carbon emissions in 2020](https://www.aigcc.net/wp-content/uploads/2021/03/March-2021_-Asias-Net-Zero-Energy-Investment-Potential-English.pdf), with its reliance on coal contributing significantly to total emissions (48% of energy consumption in 2020). At the same time, it's one of the regions most exposed to physical climate risk, due to its dense coastal populations and reliance on natural resources. Finally, there is an urgent need for investments in nature-based solutions (NbS) as the escalating loss of biodiversity in the region is expected to have a devastating effect on economies, risking as much as [63%, or $19 trillion](https://www.adb.org/news/features/short-and-long-term-actions-needed-help-asia-and-pacific-beat-global-food-crisis), of Asia-Pacific’s GDP. 

The ACS Design Grant will target critical climate mitigation and adaptation sectors in Asia including NbS, clean energy transition, and sustainable cities and infrastructure. It will provide feasibility study (USD 50,000 to 200,000) and proof of concept (USD 200,000 to 400,000) grants for innovative solutions using blended capital structures to crowd-in more climate-smart investment in the region. 

One key factor limiting climate investments is the lack of high-impact, investable solutions. The ACS Design Grant will deliver the kind of solutions the market is seeking by coming in at a critical juncture and supporting their design and launch. 

__Applications to the ACS Design Grant are now open. To apply, you can follow the instructions on the Convergence website and submit the concept note before July 16th, 2023.__

"We are thrilled to be launching this new Window in Asia, with such an impressive line-up of committed anchor funders," says Joan Larrea, CEO at Convergence. "Asia has the building blocks for hosting a strong blended finance ecosystem, including local funders and investors, and well-developed capital markets. This Window has the potential to really accelerate the market by identifying key players and generating new investable blended climate finance transactions in the region."

Convergence has over seven years of experience managing several Design Funding Windows that have delivered strong results. To date, through its [Design Funding](https://www.convergence.finance/design-funding) program, Convergence has supported 36 solutions and awarded $11 million in design and proof of concept funding. These solutions have already catalyzed over $1.9 billion in additional capital for critical development sectors globally. 

__QUOTES FROM ANCHOR DONORS:__

*“An effective climate transition will require close partnership among public, private and philanthropic actors. With appropriate de-risking mechanisms and the apportionment of risks across these actors, blended finance can reduce the cost of capital and spur transition investments. The ACS Design Grant, co-developed by Convergence and the Monetary Authority of Singapore, serves as a springboard for innovative blended finance solutions to be developed and scaled, and it has been heartening to see strong support from public and philanthropic partners.”* 

— Gillian Tan, Chief Sustainability Officer and Assistant Managing Director (Development and International) of the Monetary Authority of Singapore

*“DFAT has worked closely with Convergence for several years to generate a pipeline of blended finance investments in the region and we are truly excited with this opportunity to join forces with Singapore to develop scale and opportunity for public and private investors in Asia looking to tackle climate change.”* 

— Kristin Tilley, Australian Ambassador for Climate Change Department of Foreign Affairs and Trade

*“At UBS Optimus Foundation, the blended finance approach is core to how we use philanthropic funds to attract public and commercial capital to scale the work of social and environmental initiatives on the ground. We are delighted to contribute to the Asia Climate Solutions Design Grant which is a great example of how we deploy blended finance and our focus on nature-based solutions.”*

— Maya Ziswiler, CEO of UBS Optimus Foundation

*“The Olayan Group has long been committed to philanthropy and good corporate citizenship in the communities where we do business. As a multinational enterprise, we know that climate change knows no boundaries. We have worked to offset our own carbon footprint around the world, including in Singapore. It's also why The Olayan Group is proud to support the ACS Design Grant. We hope the grants will incubate ideas and companies, increasing climate resiliency in the Asia-Pacific region and beyond.”*

— Sung Chul Whang, General Counsel, Asia, of The Olayan Group

__About Convergence__

[Convergence](https://www.convergence.finance/) is the global network for blended finance. On top of market acceleration through its Design Funding program, Convergence generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 160 public, private, and philanthropic investors as well as sponsors of transactions and funds.

Convergence’s [Design Funding Program](https://www.convergence.finance/design-funding) operates as a market acceleration tool providing early-stage capital to support blended finance solutions in frontier markets and nascent sectors to accelerate the number of investible transactions in market targeting SDGs.

__About the Monetary Authority of Singapore__

The [Monetary Authority of Singapore](https://www.mas.gov.sg/) (MAS) is Singapore’s central bank and integrated financial regulator. As a central bank, MAS promotes sustained, non-inflationary economic growth through the conduct of monetary policy and close macroeconomic surveillance and analysis. As an integrated financial supervisor, MAS fosters a sound financial services sector through its prudential oversight of all financial institutions in Singapore and financial market infrastructures. It is responsible for well-functioning financial markets, sound conduct, and investor education. MAS also works with the financial industry to promote Singapore as a dynamic international financial centre. 

MAS launched its [Finance for Net Zero Action Plan](https://www.mas.gov.sg/news/speeches/2023/official-launch-of-sgfin) in April to catalyse Asia’s net zero transition, expanding its focus from pure green finance to include transition finance. It covers outcomes in data, definitions & disclosures, a climate resilient financial sector and credible transition plans for FIs. MAS will continue to grow and scale Green FinTech solutions and develop the skills and capabilities for Singaporeans and our financial sector. 

__About the Australian Department of Foreign Affairs and Trade__

The [Australian Department of Foreign Affairs and Trade](https://www.dfat.gov.au/) promotes and protects Australia’s international interests to support our security and prosperity. We work with international partners and other countries to tackle global challenges, increase trade and investment opportunities, protect international rules, keep our region stable and help Australians overseas.

__About UBS Optimus Foundation__

[UBS Optimus Foundation](http://www.ubs.com/optimus) is an independent philanthropy associated with a global wealth manager, pioneering innovative ways to tackle some of the world’s most pressing social- and environmental problems. It is a leader in social finance, testing and proving new tools in support of education, health, the environment, and child protection. It applies an investment-based philosophy and specializes in scalable, evidence-based approaches like outcomes-based finance and blended finance. UBS Optimus Foundation operates in a worldwide network of partners and philanthropists who seek to drive systemic change on a global scale. 

__About Olayan Group__

The [Olayan Group](https://olayan.com/) is a multinational enterprise with an actively managed portfolio of global investments. The Group has international offices in Vaduz, New York, London, Luxembourg, Athens, Riyadh and Singapore. The Group’s in-house professionals manage a multi-billion-dollar investment portfolio.

__MEDIA CONTACT__

__Karolyn Xie__ 
+44 7723 360244 
Interim Head of Communications 
Convergence Blended Finance 
karolyn.xie@convergence.finance

Convergence has launched the Asia Climate Solutions (ACS) Design Grant to award grants for the design and launch of innovative blended finance solutions for climate transition and resilience in developing markets in Asia.

Convergence launches Asia Climate Solutions Design Grant

Convergence launches multi-donor funding window for climate blended finance solutions in Asia

*This op-ed was originally published on [Capital Ethiopia](https://www.capitalethiopia.com/2023/05/29/how-blended-finance-can-enable-ethiopia-to-regain-its-place-as-africas-growth-engine/) and [Addis Fortune](https://addisfortune.news/how-blended-finance-can-enable-ethiopia-to-regain-its-place-as-africas-growth-engine/).*

Ethiopia is an attractive destination for private capital due to its large population, abundant natural resources, and strategic location in East Africa. From 2004-2015, real economic growth in Ethiopia accelerated to 10.2% per annum, thanks in large part to a public investment-led growth model implemented since the mid-1990’s. However, from 2016-2021 the country saw growth decelerate to 7.8% per annum due to a series of macroeconomic challenges including foreign currency scarcity, mounting debt, and inflation, in addition to structural bottlenecks. To address these challenges and regain the growth momentum, the Government of Ethiopia is rightly transitioning towards a private sector-led growth model, by stimulating private sector investment and participation in the economy.

For several years, Ethiopia has been a recipient of development aid and concessional loans from international donors and financial institutions, which have helped finance critical infrastructure and social programs. However, the current leadership recognizes that traditional development assistance alone is not sufficient to achieve sustained economic growth and development. The country’s balance sheet is stretched due to exogenous factors including those stemming from the Russian invasion of Ukraine, and endogenous factors such as conflict and instability. Therefore, instead of a state-led model of development, Ethiopia should mobilize private capital to finance critical infrastructure, generate tax revenues, promote exports, create jobs and improve living standards.

Blended finance offers a viable pathway to this end. Blended finance is a financial structuring approach that combines public, philanthropic, and private capital to finance pro-poor investments that support sustainable development. It has gained traction in recent years as a means to leverage different types of funding to achieve development objectives, particularly in countries where traditional sources of financing may be limited or insufficient.

The Ethiopian Government’s Ten Year (2021-2030) Development Plan, ‘A Pathway to Prosperity,’ prioritizes agriculture, energy and financial services as a means to double per capita income by 2030. This represents as opportunity- according to Convergence, the global network for blended finance, these three sectors account for the largest share of blended finance transactions (>70%) to date, making the country’s priorities especially well aligned with the existing blended finance market.

In fact, Ethiopia has already seen the successful implementation of blended finance initiatives and transactions such as the Assela Wind Power Project, the financing of the Vision Fund Microfinance Institution (VFMI) and the acquisition of aircraft for Ethiopian Airlines.

The investment into Ethiopian Airlines is particularly noteworthy because it demonstrates how blended finance can combine public and private sector resources to support the growth of a strategic industry. The debt financing package, which involved the Export-Import Bank of the United States (Ex-Im Bank), JP Morgan, the Emerging Africa Infrastructure Fund (part of the Private Infrastructure Development Group) and ING Group amongst others, provided Ethiopian Airlines with the necessary funds to purchase 10 new Boeing 787-8 Dreamliner aircraft and support its expansion plans. A loan guarantee, longer tenor (scarce in the aircraft financing industry in Africa), and subordinate debt enabled commercially oriented investors to participate in this transaction which has helped to promote sustainable development in Ethiopia by creating jobs and supporting the country’s aviation industry.

Another example of a successful Ethiopian blended finance transaction is the risk sharing guarantee the Netherlands Development Finance Company (FMO) provided the Commercial Bank of Ethiopia (CBE) on a loan to VFMI, Ethiopia’s largest privately owned microfinance institution. Thanks to FMO’s guarantee, VFMI received access to a credit facility from CBE to help facilitate the expansion of its operations in rural and remote areas. FMO’s guarantee, part of the Micro and Small Enterprises Fund (MASSIF), covered 65% of CBE’s loan, biting down significant risk from CBE. Without FMO’s guarantee, CBE would not have provided VFMI with this loan, which is now a major source of liquidity for on-lending to underserved rural and women clients.

Private sector investors are often hesitant to invest in developing countries due to real and perceived risks such as political instability, foreign exchange fluctuations, and credit risk amongst others. By leveraging development funding to reduce the absolute level of risk and/or alter the risk-return ratio, blended finance can help overcome some of the risks (real or perceived) faced by private investors when looking to finance transactions in Ethiopia.

However, increasing blended finance flows into a country requires a permissive policy regulatory environment: pro-investment government policies that prioritize macro stability, sensible tax policy and administration, and repatriation of profits (among others) are vital to unlocking financing flows into Ethiopia. This is why progress on the Home-Grown Economic Reform Agenda is followed with great interest by investors, and the next iteration of these reforms will be critical to facilitating the ease of doing business and investment attraction in the country.

The Government of Ethiopia would like to assess the potential of blended finance in terms of financing its development agenda. Since blended finance requires multistakeholder engagement and collaboration, the Embassy of Canada in Addis Ababa, in partnership with Convergence and the Federal Democratic Republic of Ethiopia – Ministry of Finance will host a high-level blended finance forum in Addis Ababa on June 5th, 2023. This event will bring together senior government officials, private investors, the donor community, and UN Agencies amongst others to discuss the potential of and create awareness around blended finance as a non-traditional source of development finance.

A visit to this dynamic country makes it clear that Ethiopia’s true economic potential is waiting to be unleashed. With a concerted effort from public, private, and philanthropic actors, Ethiopia can once again regain its rightful place as Africa’s growth engine.

How Blended Finance Can Enable Ethiopia To Regain Its Place As Africa’s Growth Engine

When protracted crises cause complex humanitarian challenges, long term donors and host governments often face financial strain as they struggle to find permanent solutions. Blended finance is one answer to the appeal for a new paradigm in the humanitarian sector.

For this approach, first, immediate needs must have been met by traditional aid and a level of stabilization must have been achieved. Under these conditions, blended finance can shift attitudes in the humanitarian and development sectors from regarding aid recipients as *victims of circumstance* to *active economic actors*. As a structuring approach, blended finance can facilitate long-term solutions through tri-sector partnerships that support the resiliency, resourcefulness and entrepreneurial ambitions of vulnerable beneficiaries and communities.  

__Local Financial Market Development__

In fragile contexts, blended finance approaches can bolster financial inclusion and strengthen local capital markets. Concessional capital providers can deploy funds to de-risk local financial institutions and unlock lending to the unbanked, traditionally deemed too risky. An example of this approach is __Nasira__, a risk-sharing facility managed by the Dutch Development Bank (FMO) and the European Union Commission supporting local financial institutions to increase their lending to underserved segments such as women, youth and migrant business-owners. Nasira enters into revolving guarantee agreements with local financial institutions and takes on 95% of the default risk of an entire loan portfolio. By limiting the risk exposure of the domestic banks, this facility narrows the financing gap for the underserved market and stimulates market activity through their support of local entrepreneurs. 

Another example of a blended finance mechanism in support of credit access for vulnerable populations is the __Revolving Credit Fund__ being set up by the Near East Foundation, a non-profit organization with operations based across the Middle East/North Africa (MENA) region. The Fund will supply microloans and larger development loans to Syrian refugees in Jordan to support business growth, job creation, and local economy recovery. The Revolving Credit Fund includes a first-loss tranche, with a variety of impact-first investors supplying the senior tranche. The structure also includes sleeves for grant capital dedicated to technical assistance, impact measurement and capital and operational expenditures to support the borrowers’ capacity-building in financial literacy and business development. Further, the __KOIS Refugee Development Impact Bond__, supported at its conceptual stages by a design grant funding from Convergence and later implemented by the Near East Foundation, is a 4-year microenterprise training and grants program focused on businesses for refugees in Jordan and Lebanon tied to tangible impact outcomes-based returns. 

Beyond credit access, Developing World Markets, a New York-based emerging markets fund manager, manages the __Displaced Communities Fund__ which deploys private equity investments into inclusive financial institutions and businesses serving displaced communities and vulnerable populations across Africa. 

__Sustainable Infrastructure__

Implicit in the blended approach are strong and impactful partnerships amongst the public, private and philanthropic sectors. Aid agencies and non-governmental organizations, with deep knowledge of the local context, contribute to building local capacity and creating the enabling environment for a critical infrastructure project. Development bank capital can then be leveraged alongside local government commitment to adjust the risk/return profile of the projects to attract private sector interest. Investments into significant infrastructure such as energy, telecom or water and sanitation benefit from the efficiency and expertise of the private sector, creating important economic impact. For example, the [World Health Organization](https://apps.who.int/iris/bitstream/handle/10665/143953/WHO_FWC_WSH_14.01_eng.pdf;jsessionid=94E1F3529F49920B2205602DDFE0D24A?sequence=2) (WHO) estimates that investments in water supply and sanitation generate up to USD4.30 for every USD1.00 spent. 

The International Committee of the Red Cross (ICRC) is designing innovative approaches in fragile states in the water sector with the __Goma West Water Resilience Project__ in the Democratic Republic of the Congo. For this project, the ICRC is partnering across sectors and blending grants with development finance and private sector intervention. The first stage of the multi-year project completed long-term feasibility and shorter-term emergency work, and prepared the groundwork for the design-build-operate phase to be financed by Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) active in the region, alongside private sector operators. The goal is to implement a fee-for-service model to be managed by private water companies. Half a million people, amongst the most vulnerable in Goma, stand to benefit. The ICRC has been investing to replicate this Goma model in other fragile contexts in Africa and the Middle East. 

Another example in the water sector is __Incofin’s Water Access Acceleration Fund__, an impact-first equity fund that will invest in small and medium-sized enterprises (SMEs) contributing to safe drinking water for last-mile customers across Africa, Asia and Latin America. Incofin’s aim is to invest in decentralizing water access and scaling local businesses for financial sustainability. 

We can also look to the __Urban Resilience Fund__, a private equity fund targeting public and private infrastructure in urban areas across Sub-Saharan Africa and the MENA region. Set up by the United Nations Capital Development Fund (UNCDF) and managed by Meridiam, the fund structure contains a first-loss equity tranche supplied by donors to protect senior investors including several DFIs and private sector entities. In addition, the structure includes a technical assistance grant and leveraged a design-stage grant to set up the fund. As climate change-induced mass migration stretches urban centers to their limits, this fund targets sustainable urban mobility, renewable energy, microgrids and improved waste management systems, amongst other critical infrastructure.

In frontier and fragile markets, any significant or permanent resolution to mounting challenges is far too complex, nuanced and financially burdensome for any one organisation, government body or sector. As the call for new partnering and financing models for humanitarian assistance becomes louder, a blended financial structuring approach, enabled and enhanced by humanitarian capacity on the ground, applies sustainable, market-based solutions with local context to mobilize public and private capital and reduce the risk for investors seeking commercial returns. While blended finance is not a panacea, this approach can support the development and strengthening of viable local financial markets and critical infrastructure, which supplements and enhances finite donor resources to scale up much needed capital into fragile states and refugee populations.

Blended finance is one answer to the appeal for a new paradigm in the humanitarian sector.

Blended Finance for the humanitarian sector

Can Blended Finance work in fragile contexts?

Convergence and Asian Venture Philanthropy Network (AVPN) have deepened their partnership through a strategic framework to expand the use of blended finance as a tool for accelerating the flow of capital towards impact in Asia and advance the Sustainable Development Goals (SDGs) in the region.

This deepened partnership is part of Convergence’s strategy to grow its influence in Asia, with the recent appointment of Ritesh Thakkar as Convergence’s new Asia Senior Advisor and the establishment of our presence in Singapore. 

As the leading ecosystem builder and social investor membership network in Asia, AVPN and its 600+ members from 33 countries move capital towards impact in Asia. AVPN’s team of 92 staff across Asia provide learning programmes and innovative approaches to social investment to foster collaborations among social investors and ensure that resources are effectively deployed. AVPN is a registered charity based in Singapore. 

This partnership framework will expand on an existing MoU between Convergence and AVPN and includes activities such as: 
- Collaborating on mobilization of philanthropic capital towards the upcoming Asia Climate Solutions Design Grant, which will provide early-stage grants for high-impact climate financing solutions in emerging markets in Asia.

- Learning and knowledge building, with concrete plans to develop and manage a blended finance learning and development program, in addition to closer collaboration on generating blended finance content with a regional focus and expanding thought leadership in Asia. 

- Leveraging each other's networks and mutual expertise to convene key actors in the region at conferences, roundtables, and workshops, with the aim of strengthening the blended finance ecosystem in Asia.  

“To help grow our influence in the region, AVPN’s vast network and deep expertise in social investment made them an obvious partner,” says Joan Larrea, Convergence CEO. “There’s huge untapped potential for blended finance in Asia and I’m excited that Convergence will have a role in helping to unlock this potential.”

“The majority of AVPN members engage in philanthropy and impact investing, and this partnership with Convergence will help us bridge the AVPN community into blended finance opportunities in Asia,” says Naina Subberwal Batra, AVPN CEO. “We see these as key conduits to implementing the large-scale projects that will move us closer to attaining the SDG and Net Zero targets in Asia.”

“Asia is an increasingly prominent destination for blended finance,” said Ritesh Thakkar, Senior Advisor, Asia Pacific, at Convergence. “This deeper partnership will enable Convergence and AVPN to more effectively grow awareness of the potential of blended finance and ultimately mobilize private capital at scale towards sustainable development in the region.”

Convergence and Asian Venture Philanthropy Network (AVPN) deepen partnership  

*San Francisco and Toronto, May 9, 2023* – The Catalytic Climate Finance Facility (CC Facility) launched today an open call for early-stage and market-ready blended climate finance vehicles seeking grant funding and technical support for scaling up. With an initial size of USD 12 million, the CC Facility has plans to increase its funding up to USD 100 million. The CC Facility is a partnership between Convergence and Climate Policy Initiative (CPI), two global leaders in blended and climate finance. 

The CC Facility will select promising solutions to launch and scale through grant funding and dedicated acceleration services to sectors that are severely under-financed in developing countries. There is a special call for ideas targeting climate adaptation for agriculture in Sub-Saharan Africa and South Asia.

“Given the urgency of the latest IPCC report, it is clear that we must develop quality climate solutions that can be launched to market quickly and ensure money is flowing into these projects,” said CPI Global Managing Director Dr Barbara Buchner. “Our approach to the CC Facility draws on over two decades of combined experience from Convergence and CPI, continuing our efforts to bridge the acceleration gap and help scale up solutions faster.”

With funding from three anchor donors, Bill & Melinda Gates Foundation, Global Affairs Canada, and Australia's Department of Foreign Affairs and Trade, the CC Facility targets one of the main barriers in the development process of a climate blended finance idea: the acceleration stage, when solutions face a critical valley of death, taking longer to resume operations due to a lack of support. 

“The CC Facility intends to create investible deal pipeline for mainstream investors by supporting concepts at the acceleration stage,” said Convergence CEO Joan Larrea. “We will leverage the expertise of our two organizations to help early-stage, market-ready solutions scale up quickly, navigate potential pitfalls, and maximize their impact in a changing economic landscape.” 

Convergence and CPI have been working on the investment pipeline issue for years through their respective innovative finance programs, [Design Funding](https://www.convergence.finance/design-funding) and the [Global Innovation Lab for Climate Finance](https://www.climatepolicyinitiative.org/the-programs/the-global-innovation-lab-for-climate-finance/) (the Lab), pushing investible, scaled structures into the market. However, these initiatives are more focused on the earlier stages of the development process, addressing the design and incubation side of the spectrum. The CC Facility is a continuation of this work and a critical next step for solutions to achieve scalability. It aims to be an ecosystem builder and play a key role in mainstreaming climate action, with an emphasis on gender responsiveness and local capacity. 

“Helping developing countries fight climate change and adapt to its effects is critical. This will need both public and private sectors to work together and invest. This initiative will focus on innovative, high impact actions in the areas of clean energy, climate-smart agriculture, and nature-based solutions. Canada is proud to support this initiative and help mobilize the investments needed to urgently fight climate change and build resilience to its effects,” said Cam Do, Director General of Innovative and Climate Finance, Global Affairs Canada.

Concept notes must be submitted on Convergence’s website by June 9 and will be reviewed on a rolling basis.

__About Convergence__

Convergence is the global network for blended finance. On top of market acceleration through its Design Funding program, Convergence generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 160 public, private, and philanthropic investors as well as sponsors of transactions and funds.

Convergence’s Design Funding Program operates as a market acceleration tool providing early-stage capital to support blended finance solutions in frontier markets and nascent sectors to accelerate the number of investible transactions in market targeting SDGs.

__About Climate Policy Initiative__

CPI is an analysis and advisory organization with deep expertise in finance and policy. Our mission is to help governments, businesses, and financial institutions drive economic growth while addressing climate change. CPI has six offices around the world in Brazil, India, Indonesia, the United Kingdom, and the United States.

CPI serves as the Secretariat for the Global Innovation Lab for Climate Finance (the Lab), an incubator program that develops innovative financial mechanisms to drive private investments into climate change mitigation and adaptation in developing economies. 

__MEDIA CONTACTS__

__Sijia Yi__ 
Head of Communications 
Convergence Blended Finance 
sijia.yi@convergence.finance 
+1(647) 573-5993

__Júlio Lubianco__ 
Communications Manager 
Climate Policy Initiative 
julio.lubianco@cpiglobal.org 
+55 21 96463-7061

__Sam Goodman__ 
Communications Associate 
Climate Policy Initiative 
sam.goodman@cpiglobal.org 
+506 8833 7435

The Catalytic Climate Finance Facility (CC Facility) launched today an open call for early-stage and market-ready blended climate finance vehicles seeking grant funding and technical support for scaling up. 

Convergence & CPI launch Catalytic Climate Finance Facility

Convergence and CPI launch USD 12 million Catalytic Climate Finance Facility to accelerate the implementation of climate finance solutions

*This [op-ed](https://nextbillion.net/blueprint-closing-sdg-financing-gap-developing-countries/) was originally published on [NextBillion](https://nextbillion.net/).*

In 2009, developed countries committed to mobilizing US [$100 billion](https://www.oecd.org/climate-change/finance-usd-100-billion-goal/) per year for climate action in developing countries by 2020.

They failed.

Today, a massive climate and Sustainable Development Goal (SDG) financing gap still persists — and even after the SDGs and Paris Agreement laid out a critical role for the private sector in 2016, the subsequent years have brought only modest increases in private investment mobilization. As of 2020, the annual SDG financing gap for developing countries stood at [$4.2 trillion](https://www.oecd.org/dev/OECD-UNDP-Scoping-Note-Closing-SDG-Financing-Gap-COVID-19-era.pdf) — up from $2.5 trillion pre-pandemic. Private capital is crucial to closing this gap, but only [4% of the $410 trillion](https://www.convergence.finance/resource/the-action-plan-for-climate-and-sdg-investment-mobilization/view) in global private assets is invested in developing countries (excluding China). And the $240 billion invested by public development finance annually only mobilizes an average of [$44 billion](https://www.convergence.finance/resource/the-action-plan-for-climate-and-sdg-investment-mobilization/view) in private investment each year, which amounts to just 1% of the climate and SDG investment needs in these countries. Yet while there have been many calls to action among both public and private stakeholders to increase investment into the SDGs, they have lacked a strategy and blueprint for getting there.

This lack of progress reveals a key challenge in development finance: Public and private investments in emerging markets and developing economies (EMDEs) are too often fragmented, crowding each other out instead of reinforcing each other. A deeper collaboration is needed — one that recognizes the limits of public investment and the increasing appetite among private investors to engage in fast-growing EMDEs, especially in [impact investing](https://www.forbes.com/sites/benjaminlaker/2022/11/17/demand-for-impact-investing-is-rising-heres-why/?sh=2068e268285f), [ESG](https://www.pwc.com/gx/en/news-room/press-releases/2022/awm-revolution-2022-report.html) and other purpose-driven investing sectors.

Over the last year, [Convergence](https://www.convergence.finance/about) and [USAID](https://www.usaid.gov/invest) worked with over 100 stakeholders — including private investor groups managing a combined $130 trillion in assets under management, as well as donor governments and philanthropic foundations — to find a solution to significantly increase sustainable investment. Through extensive workshops and knowledge exchanges, plus Convergence’s more than 15 years of evidence and our [databank of 750+ blended finance transactions](https://www.convergence.finance/blended-finance) that have demonstrated the most effective approaches and structures, we collectively agreed on an action plan to increase investment from $240 billion to $530 billion annually. In one year. With no additional public sector resources needed.

The [Action Plan for Climate and SDG Investment Mobilization](https://www.convergence.finance/resource/the-action-plan-for-climate-and-sdg-investment-mobilization-high-level/view) lays out how a small amount of public and philanthropic funding can become a catalyst for system-wide change by increasing the number of investable climate and SDG projects in EMDEs, while boosting the supply of capital invested in those projects. Through five integrated pillars, it provides a blueprint for how current development finance and assistance resources can be redeployed more effectively, more than doubling total climate and SDG investment into developing economies. The key elements of this blueprint are outlined below.

### Increase the supply of flexible catalytic funding by crowding in a larger universe of resources and innovation.
Catalytic funding is the most important ingredient in efforts to significantly increase climate and SDG investment, due to its ability to de-risk investment opportunities and create assets that meet the risk and return requirements of investors with fiduciary duties, like large pension funds. Private investors may be interested in investments with SDG and climate impact, but the real or perceived risks in EMDEs often prevent them from investing. Redirecting $13-15 billion per year from donor governments and philanthropic foundations into catalytic funding could ultimately lead to the mobilization of $286 billion in private capital — equivalent to seven times the current annual amounts mobilized by the entire development and climate finance systems. There is clear interest in this option among private investors: Some have organized themselves into groups, such as the [Global Investors for Sustainable Development](https://www.gisdalliance.org/sites/default/files/2021-10/GISD%20Position%20Paper%20-%20DC%20Recommendations%20Private%20Finance%20Mobilization_18%20Oct_0.pdf) Alliance, and made calls to action stating that they have the funds to invest, so long as the development finance community and others create investment assets that meet their fiduciary obligations.

### Make multilateral development banks (MDBs) and development finance institutions (DFIs) catalysts of mobilization.
MDBs and DFIs have been investing in development for more than half a century, yet their commitments only constitute around 3.5% of the annual climate and SDG investment needs in EMDEs. Plus, their business models have remained largely unchanged since their inception — even though global and EMDE financial systems have changed considerably. Despite having a valuable set of relationships, capacities and comparative advantages, MDBs and DFIs too often operate within their own silos, reflecting the central role public capital has traditionally played in the development finance landscape. We need to move away from the past era of public sector dominance towards a modern model that reflects the much broader universe of investment actors working today. To that end, MDBs and DFIs should adjust their priorities and their Key Performance Indicators related to governance, to prioritize deeper integration with private investors and help mitigate the risks that are preventing the private sector from investing in the first place.

### Maximize the investable pipeline through more integrated development and climate finance systems.
Providers of catalytic capital, like donors and philanthropic foundations, should prioritize creating investment assets that are standardized, publicly listed and traded. This would open up EMDE investment opportunities to virtually all investors — and over time, it would boost the transparency and supply of capital, thereby decreasing the cost of capital through increased competition among funders.

### Provide investors with access to the best investment data and mobilization resources.
Greater availability, transparency and credibility in investment data is needed, so investors can better analyze investment opportunities and benchmark their risk in less familiar markets. While some centralized databases do exist, data sharing has not been systematic or reliable. To address this, the Action Plan recommends the establishment of a centralized, curated online investment mobilization hub, to increase investor knowledge and access to data on investing in EMDEs.

### Empower local capital markets and financial intermediaries in EMDEs.
Global private assets invested in EMDEs are a growing source of capital, currently estimated at $17 trillion (not including China). However, many climate and SDG projects seek investments of less than $5 million, making them too small for global investors, but just right for local investors. Sourcing more capital from EMDEs into both local development projects and the broader global economy will require a targeted campaign to improve and expand local capital markets, along with efforts to empower financial intermediaries by increasing their available risk capital and providing significantly higher amounts of financing in local currencies.

Ultimately, this Action Plan aims to harness new resources, actors and innovations to change the status quo in development finance. By adopting a more catalytic approach, grounded in blended finance principles already practiced by donor governments and philanthropic foundations, public and philanthropic resources can mobilize significantly greater sums of private investment focused on the world’s most pressing challenges. This strategy would not eliminate all of the risk (real or perceived) of investing in EMDEs, but it would help manage that risk and scale investment flows more effectively. And whatever the extent of these risks, the risk of inaction is far greater.
