Convergence Eventbrite

__Thursday, February 18th 2021, 9am – 11:30am Singapore time (GMT +8):__

[Register](https://register.gotowebinar.com/register/5391689875080398093 "Register for the event")

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This 2.5-hour (150 minutes) interactive seminar will cover:

- How blended finance can mobilize additional private sector finance for financial inclusion;
- Case studies and trend analysis on deals that provide financing to domestic banks, microfinance institutions and alternative financial service providers; and
- Recommendations to practitioners on leveraging blended finance effectively.

Blended finance has a long track record of supporting financial inclusion solutions. Financial inclusion solutions support banks, cooperatives, microfinance institutions (MFIs), money transfer companies and mobile network operators to extend the reach of financial markets to those most in need. Relative to other impact themes, the private sector has demonstrated a healthy appetite for financial inclusion in developing countries - 25% of blended finance deals in Convergence’s database target financial inclusion. In this seminar, Convergence members will share their insights, and participants will discuss current initiatives in small groups. 

This is the fourth seminar in our five-part series “Blended Finance in Select Sectors". You are welcome to register even if you have not attended any of the preceding seminars.

*The seminar has limited space to ensure an intensive and practice-driven learning experience. Each Convergence member organization has two complimentary seats in each seminar, please apply the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*

Blended Finance for Financial Inclusion (Asia/West Coast)

Blended Finance for Financial Inclusion is the fourth seminar in Convergence's series "Blended Finance in Select Sectors".

Blended Finance for Financial Inclusion, Asia/West Coast

__Wednesday, February 17th 2021, 10am – 12:30pm Eastern time (GMT -5):__

[Register](https://register.gotowebinar.com/register/2907517074957668109 "Register for the event")

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This 2.5-hour (150 minutes) interactive seminar will cover:

- How blended finance can mobilize additional private sector finance for financial inclusion;
- Case studies and trend analysis on deals that provide financing to domestic banks, microfinance institutions and alternative financial service providers; and
- Recommendations to practitioners on leveraging blended finance effectively.

Blended finance has a long track record of supporting financial inclusion solutions. Financial inclusion solutions support banks, cooperatives, microfinance institutions (MFIs), money transfer companies and mobile network operators to extend the reach of financial markets to those most in need. Relative to other impact themes, the private sector has demonstrated a healthy appetite for financial inclusion in developing countries - 25% of blended finance deals in Convergence’s database target financial inclusion. In this seminar, Convergence members will share their insights, and participants will discuss current initiatives in small groups. 

This is the fourth seminar in our five-part series “Blended Finance in Select Sectors". You are welcome to register even if you have not attended any of the preceding seminars.

*The seminar has limited space to ensure an intensive and practice-driven learning experience. Each Convergence member organization has two complimentary seats in each seminar, please apply the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*

Blended Finance for Financial Inclusion (Europe/East Coast)

Blended Finance for Financial Inclusion, Europe/East Coast

The OECD will mark the first anniversary of the Development Assistance Committee (DAC)’s Community of Practice on Private Finance for Sustainable Development (CoP-PFSD) with a series of discussions that will aim to answer the following critical policy topics in a COVID-19 era: 

__Addressing regulatory and financial capacity constraints__ 
Institutions that deliver development finance, such as DFIs, will be required to respond to the COVID-19 crisis with constrained financial capacity: a situation where balance sheet optimisation can play an important role. This discussion will feed on insights from the Report of the Global Investors for Sustainable Development. 

__Closing the SDG financing gap: making the most of blended finance__
Mobilizing additional financial resources effectively for sustainable development requires mitigating investment risks and encouraging commercial finance providers. Blended finance instruments — such as guarantees and direct investment — have proven effective, with USD 205.2 billion in private capital mobilized for development over 2012-18. The OECD DAC Blended Finance Guidance provides policy makers and development finance actors with the background, evidence, best practice and tools to engage in blended finance effectively. 

__Driving impact: the role of frameworks and standards__ 
Businesses and investors often point out their SDG alignment without disclosing how they contribute meaningfully to the achievement of the Goals. Public and private actors need to agree on common frameworks and standards to measure the impact of sustainable development investments, and reduce the risks of “SDG washing”. 

__Focusing on climate and gender to build back better__ 
With less than 10 years to reduce global net CO2 emissions by 45% and limit global warming to 1.5C, mobilizing climate finance may be the most pressing challenge of our time. Governments, institutional investors and other actors must scale up climate finance mechanisms, strategies and disclosure levels in order to ensure the COVID-19 build back is sustainable. Adopting a gender lens while implementing blended finance initiatives is also necessary for ‘smart’ finance to meet the needs and priorities of marginalised groups.

2021 Blended Finance Impact Week

Convergence's Design Funding program supports the design and launch of new blended finance solutions that aim to catalyze private investment in developing countries and towards the Sustainable Development Goals. Convergence is currently accepting applications for both of its Design Funding windows, the [Asia Natural Capital Window](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window) and the [Indo-Pacific Window](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window).

To help applicants submit their strongest proposals, we are hosting two webinars on January 13th (9pm EST / 10am SGT & HKT for those in Asia-Pacific) and January 26th (9am EST / 3pm CET for those in Europe and the Americas), to offer insights on our Design Funding program and Convergence's selection process. Current grantees will also share their application experience and answer any questions related to their design funding journey.

__Register for the webinar today! __

- Get your Design Funding questions answered 

- Get insight into our decision making process 

- And, get advice on how to submit a successful application

__Applications for both windows are accepted on a rolling basis. The next submission deadlines for the windows are February 11 and February 18 for the Asia Natural Capital Window and Indo-Pacific Window, respectively.__

[RSVP here for the January 26th webinar (9am EST / 3pm CET).](https://www.eventbrite.com/e/133785418789)

__You must register to gain access to the Zoom link. __

Convergence's Design Funding Windows: Everything you need to know to apply by February

Design Funding: Everything you need to know to apply

__Wednesday, January 20th 2021, 9am – 11:30am Singapore time (GMT +8):__

[Register](https://attendee.gotowebinar.com/register/1327631014943408400 "Register for the event")

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This 2.5-hour (150 minutes) interactive seminar will cover:

- How blended finance can mobilize additional private sector finance for the agricultural sector
- The rationale and considerations for leveraging blended finance as a structuring approach;
- Case studies and trend analysis on transactions focused on small-holder farmers, agri-SMEs, and value chain financing; and
- Recommendations to practitioners on leveraging blended finance effectively.

During the seminar, Convergence members will share their insights, and participants will discuss current initiatives in small groups. 

This is the third seminar in our five-part series “Blended Finance in Select Sectors". You are welcome to register even if you have not attended any of the preceding seminars.

*The seminar has limited space to ensure an intensive and practice-driven learning experience. Each Convergence member organization has two complimentary seats in each seminar, please apply the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*

Blended Finance for Agriculture (Asia/West Coast)

Blended Finance for Agriculture is the third seminar in Convergence's series "Blended Finance in Select Sectors".

Blended Finance for Agriculture, Asia/West Coast

__Event has reached full capacity. Click on "Documents" above to download the report.__

Over the course of three months, a Working Group comprised of donors, foundations, impact investors, implementing agencies, social enterprises, financial intermediaries, and development banks explored the use of blended finance in two narrow segments of water service delivery and sanitation: (1) repair and maintenance of water infrastructure in less densely populated areas; and (2) fecal sludge management.

The Outcome Document captures the current landscape of approaches, points to case examples of blended finance transactions and gives recommendations on deploying blended finance effectively. Register for the launch event on Zoom to hear perspectives of Working Group members on blended finance for WASH, including :
- USAID
- Incofin Investment Management
- WASTE Netherlands
- Rural Water Supply Network
- WaterEquity
- Center for Water and Sanitation, CEPT University
- Social Finance
- Osprey Foundation
- Aqua for All
- Inter-American Development Bank


Launch of Outcome Document “Blended Finance for Water and Sanitation” 

Outcome Document of the Sida-Convergence Working Group on Blended Finance for Water Infrastructure Maintenance and Fecal Sludge Management.

Blended Finance for Water Infrastructure Maintenance and Fecal Sludge Management

The Outcome Document captures the current landscape of approaches, points to case examples of blended finance transactions and gives recommendations on deploying blended finance effectively. 

Launch of Outcome Document Blended Finance Water Sanitation

Convergence's Design Funding program supports the design and launch of new blended finance solutions that aim to catalyze private investment in developing countries and towards the Sustainable Development Goals. Convergence is currently accepting applications for both of its Design Funding windows, the [Asia Natural Capital Window](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window) and the [Indo-Pacific Window](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window).

To help applicants submit their strongest proposals, we are hosting two webinars on January 13th (9pm EST / 10am SGT & HKT for those in Asia-Pacific) and January 26th (9am EST / 3pm CET for those in Europe and the Americas), to offer insights on our Design Funding program and Convergence's selection process. Current grantees will also share their application experience and answer any questions related to their design funding journey.

__Register for the webinar today! __

- Get your Design Funding questions answered 

- Get insight into our decision making process 

- And, get advice on how to submit a successful application

__Applications for both windows are accepted on a rolling basis. The next submission deadlines for the windows are February 11 and February 18 for the Asia Natural Capital Window and Indo-Pacific Window, respectively.__

[RSVP here for the January 14th webinar (10:00am SGT & HKT).](https://www.eventbrite.com/e/convergence-design-funding-everything-you-need-to-know-to-apply-tickets-133775372741)

__You must register to gain access to the Zoom link. __

__Wednesday, December 16th 2020, 9am – 11:30am Singapore time (GMT +8):__

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This 2.5-hour (150 minutes) interactive seminar will cover:

- How blended finance can mobilize additional private sector financing for climate and the environment;
- The rationale and considerations behind using blended finance instruments;
- Case studies and trend analysis on transactions in these sectors; and
- Recommendations to practitioners on leveraging blended finance effectively to create development impact for climate and the environment.

This seminar will cover where and how blended finance approaches can be used to attract additional commercial capital to climate change mitigation and  adaptation as well as environmental protection. Convergence members will share their insights, and participants will discuss current initiatives in small group settings.

This is the second seminar in our five-part series “Blended Finance in Select Sectors". You are welcome to register even if you have not attended any of the preceding seminars.

*The seminar has limited space to ensure an intensive and practice-driven learning experience. We recommend that no more than two representatives from each organization attend. Registration is complimentary for members, applying the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*


Blended Finance for Climate and the Environment (Asia/West Coast) 

Blended Finance for Climate and the Environment is the second seminar in Convergence's series "Blended Finance in Select Sectors".

Blended Finance for Climate & Environment, Asia/West Coast

Blended Finance in the Least Developed Countries (LDCs) report will outline the latest trends in blended finance approaches in LDCs, including updated data and guest pieces by practitioners and experts working in the blended finance space highlighting the opportunities and challenges of applying blended finance solutions in LDCs. 

Blended Finance in Least Developed Countries: OECD-UNCDF Report Launch Event

OECD-UNCDF Blended Finance in LDCs Report Launch

Convergence logo official

We invite you to join us virtually as we bring forward key perspectives from investors, deal sponsors and development practitioners across the Asia-Pacific, __Tuesday, November 24th at 9:00 am SGT__.

[The State of Blended Finance](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view "Convergence | The State of Blended Finance 2020 ") is Convergence’s annual report on the latest trends, opportunities and challenges in the blended finance market. According to this year’s report, Asia is emerging as a new centre of gravity for blended finance, with increased traction in East Asia and the Pacific. As part of the launch event on the 24th, Convergence will bring together experts from the field to narrow in on the trends, opportunities and challenges specific to frontier and developing markets in the region, and discuss the opportunities for scale to increase capital investment in the Sustainable Development Goals across the Asia-Pacific.

We are happy to engage the following speakers as panelists:
- Ronie Mak, Managing Director at RS Group
- Christian Deseglise, Head of Sustainable Finance and Investments, HSBC
- Sara Jane Ahmed, Finance Advisor, V-20
- Simba Marekera, Head of Investment Solutions, Brightlight Group 

The State of Blended Finance builds on the inaugural report released in July 2017. [The State of Blended Finance 2020](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view "Convergence | The State of Blended Finance 2020 ") includes input from Convergence’s 200 member institutions and other key market participants.

Asia-Pacific Perspectives on The State of Blended Finance 2020

Key perspectives from investors, deal sponsors and development practitioners across the Asia-Pacific on The State of Blended Finance 2020.

Asia-Pacific Perspectives on The State of Blended Finance

We invite you to join us virtually as we bring forward key perspectives from investors, deal sponsors and development practitioners from Africa, __Tuesday, November 17th at 2:00 pm EAT__.

[The State of Blended Finance](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view "Convergence | The State of Blended Finance 2020 ") is Convergence’s annual report on the latest trends, opportunities and challenges in the blended finance market. During this event, Convergence will present highlights, historical trends, and our forecast for blended finance in Africa. In addition, we will welcome seasoned Executives in blended finance to share their perspectives on how to further scale the field to achieve the Sustainable Development Goals (SDGs) in the next decade.

We are proud to welcome the following speakers as panelists:
- Janice Kotut, Managing Director PIDG Infrasolutions, Guarantco
- Thelma Ekiyor, Managing Partner, SME.NG 
- Todd Micklewaite, Head of Alternatives Distribution, Sanlam Investments

The State of Blended Finance builds on the inaugural report released in July 2017. [The State of Blended Finance 2020](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view "Convergence | The State of Blended Finance 2020 ") includes input from Convergence’s 200 member institutions and other key market participants, and draws on data from Convergence's database of almost 600 historical transactions, and deals currently fundraising on its platform. 

African Perspectives on The State of Blended Finance 2020

Key perspectives from investors, deal sponsors and development practitioners from Africa on The State of Blended Finance 2020.

__Thursday, November 12th 2020, 9am – 11:30am Singapore time (GMT +8):__

__This seminar is at full capacity.__

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This 2.5-hour (150 minutes) interactive seminar will cover:

- How blended finance can mobilize additional private sector financing for water and sanitation;
- The rationale and considerations behind using blended finance instruments;
- Case studies and trend analysis on transactions in these sectors; and
- Recommendations to practitioners on leveraging blended finance effectively.

This seminar discusses where and how blended finance approaches can be used to attract additional commercial capital to viable projects, allowing traditional development aid to refocus on projects that should not attempt to or cannot attract private capital. Convergence members will share their insights, and participants will discuss current initiatives in small groups.

This is the first seminar in our five-part series “Blended Finance in Select Sectors". You are welcome to register even if you have not attended any of the preceding seminars.

*The seminar has limited space to ensure an intensive and practice-driven learning experience. We recommend that no more than two representatives from each organization attend. Registration is complimentary for members, applying the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*


Blended Finance for Water and Sanitation (Asia/West Coast)

Blended Finance for Water and Sanitation is the first seminar in Convergence's series "Blended Finance in Select Sectors".

*__Convergence and the Swedish International Development Cooperation Agency (Sida) have co-led a Working Group on Blended Finance for Water Infrastructure Maintenance and Fecal Sludge Management (FSM). It convened over 50 representatives to discuss recommendations to mobilize additional financing for the maintenance of rural pumps and standpipes, and sanitation. This article highlights their reflections shared in the [Outcome Document on Blended Finance for Water and Sanitation](https://www.convergence.finance/resource/21SjGAEMusduo1T03h91GQ/view "Outcome Document on Blended Finance for Water and Sanitation") on the safe management of human waste. __*

 

Water and sanitation-related investments have a profound impact on other sustainable development objectives, including those tied to health, education, and the environment. In the urban and peri-urban areas of developed countries, centralized sewage systems collect human waste directly from toilets and transport fecal matter via pipes to centralized treatment facilities. In developing countries, where most toilets are not connected to central sewers, households call private operators to empty the septic tanks once they reach full capacity. Instead of delivering the waste to treatment plants, operators often dump the fecal sludge into water bodies or public lands. 

The non-sewered FSM sector is primarily characterized by these small, often informal service providers, some with trucks and suction pumps but many who empty pits and transport the waste manually. Due to the lack of reliable [revenue streams](https://www.convergence.finance/news-and-events/news/1YhpksXLd3hjtGxi43iDNK/view "Convergence | Key ingredient in the blended-finance blend: revenues") and [scale](https://www.convergence.finance/news-and-events/news/4l2G2RAIuknXQ2PFIh0cTb/view "Convergence | As blended finance deals get bigger, don’t forget the little guys"), FSM does not attract private capital easily. And, the majority of FSM business models cannot be expected to reach break-even point within a five- or seven-year time span – a typical period for investments. Many FSM enterprises that are in business for 10 or more years are still operating at a loss. Unfortunately, in most developing countries, FSM is low on the list of investment priorities for governments, making additional government support a challenging ask. Even in developed countries, sanitation service providers receive subsidies from government budgets and cross-subsidies from other utility services to survive. Lastly, in developing countries, households are often reluctant to pay more for safer managed sanitation services.

The FSM Working Group, compromised of social enterprises, donor agencies, implementing agencies, non-governmental organizations, development banks, financial intermediaries, and impact investors, has identified several pathways to increase the operational and financial viability of FSM business models. These include waste-to-energy approaches (e.g., [Safi Sana](https://www.safisana.org/en/ "Safi Sana")), franchise models (e.g., [Jibu](https://www.convergence.finance/news-and-events/news/2w333jGPvH5ohQBaXzl4Bc/view "Convergence | How Jibu brings clean water and economic opportunity to thousands")), and resource recovery models, that combine fecal sludge with solid waste management.

 

## FSM needs impact-first, patient capital

 
Early stage grant funding can be catalytic in enabling an FSM enterprise or project to grow to a stage where it is ready to take on equity and/or debt. In this case, the blending happens at the individual enterprise level, and over time. Moreover, blended structures such as pooled, layered funds, can shift the financial risks onto funders and investors willing to bear those costs to create acceptable risk-return profiles for private investors with commercial mandates. 

There must be a number of investable FSM projects/enterprises in the market to set up a pooled vehicle. Fund managers play an important role here. Fortunately, asset managers such as Developing World Markets, Total Impact Capital, and Incofin Investment Management – all Convergence members - are developing their water and sanitation capacities.

 

## Technical assistance for capacity building

 

According to the FSM Working Group, FSM service providers require technical assistance to prepare the financial models and documentation necessary to effectively engage with private investors. Financial institutions, too, require technical assistance to get familiar with FSM projects/enterprises as new borrowers. While microfinance for the construction of household toilets is becoming common practice, not least through the efforts of Convergence members [Water.org and WaterEquity](https://www.convergence.finance/resource/4VLkTKyP0lzPzDhp6IoqF0/view "Convergence Case Study | WaterCredit Investment Fund 3"), lending to FSM enterprises is still nascent. Technical assistance can build the capacities of financial institutions to assess the creditworthiness of FSM enterprises. When such measures are combined with credit enhancement instruments such as guarantees, funders are better positioned to incentivize financial institutions to build credit lines for FSM enterprises. 

 

## Crowdfunding to mobilize private capital targeting FSM enterprises

 

Several crowdfunding platforms make use of credit enhancement using donor funds, philanthropic, and impact-first capital. The platform [Trine](https://trine.com/ "Trine") focuses on solar energy markets and received a first-loss guarantee from Sida, a Convergence member. Trine fully guarantees the first € 100 loan of each new investor. The crowdfunding platform [EnergiseAfrica](https://www.energiseafrica.com/ "Energise Africa") applies a similar model, with support from the British government and Good Energies Foundation, another Convergence member. Catalytic capital providers could work with existing crowdfunding platforms to expand their services to early stage sanitation enterprises.

 

## Public money will remain critical for FSM

 

In other sectors, blended finance is often a bridging solution, leading to business models becoming fully commercially viable, with no more need for blending. However, for FSM (and many other water and sanitation services), public funding, whether through taxes or transfers, will always remain part of the solution, because the safe management of human waste is ultimately a public health objective. Therefore, funding from public institutions that include the indirect returns on improved health in their cost-benefit analyses will remain critical. Attracting private capital to investable transactions will allow traditional development aid and government funds to refocus on projects and enterprises that cannot attract private capital.

 

__To learn more, download the [Outcome Document on Blended Finance for Water and Sanitation](https://www.convergence.finance/resource/21SjGAEMusduo1T03h91GQ/view "Outcome Document on Blended Finance for Water and Sanitation").__

Convergence and Sida's Working Group on Blended Finance for Water Infrastructure Maintenance and Fecal Sludge Management (FSM) provide recommendations to mobilize additional financing for the maintenance of rural pumps and standpipes, and sanitation.

Discussing Fecal Sludge Management & Blended Finance

Why we should be discussing Fecal Sludge Management and Blended Finance

2020 marked an important inflection point for blended finance. Discussions progressed past whether blended finance is part of the solution towards how we can best approach blended finance to attract additional sources of financing, and larger volumes of private capital, in developing countries. This shift was met with increased dialogue, strategic partnership across the public and private sector, and a continued flow of early stage blended finance deals into the market. At the same time, [we reported](https://www.convergence.finance/blended-finance/2020 "Convergence | State of Blended Finance 2020 Report") that blended finance is not accelerating at the pace or scale required to help achieve the SDGs by 2030. 

Over the course of the year, the Convergence team addressed shifts and developments in the blended finance market, identifying trends, challenges and opportunities to scale blended finance, yield better blending, and secure larger volumes of private financing. Given the pervasive nature of COVID-19, Convergence focused on the role that blended finance could play in the road to recovery and [economic reconstruction](https://www.convergence.finance/news-and-events/news/dpcDxlUX2UVdIDTt9TjAi/view "Convergence | How Blended Finance Responds to COVID-19"), and what impact the global health crisis would have on economies in the developing world.

Here, we note the articles and publications that received the most interest and engagement this past year:
 

### How to Mobilize Private Investment At Scale in Blended Finance

 
Private sector investors, a diverse group of institutions, face significant barriers to invest in SDG projects in developing countries, such as high perceived and actual risk, low returns, and small investment sizes. In addition to these constraints, and despite their different mandates, investment criteria, risk-adjusted return targets, and regulations, these institutions are often approached by development organizations as a homogeneous group, which narrows their opportunity to engage in the real impactful investment opportunities in developing countries.

 

[__This report__](https://www.convergence.finance/resource/3cpgfofIUn2QY8rFEV2IFt/view "How to Mobilize Private Investment At Scale in Blended Finance") provides an analysis of the investment motivations, requirements, and constraints faced by institutional investors, and offers recommendations directly from private investors on how to accelerate the market and mobilize additional private capital. 

 

### The Forest Resilience Bond Case Study

 
Convergence has consistently identified blended finance solutions for climate and conservation as a key emerging theme. In 2020, Convergence published a case study on the Forest Resilience Bond; developed by Blue Forest Conservation, the Forest Resilience Bond (FRB) is a multi-stakeholder model that uses upfront investment from private and philanthropic investors to fund forest restoration activities. By drawing on private investment capital, the FRB model aims to increase the pace and scale of restoration activities across the western U.S.

 

[__This case study__](https://www.convergence.finance/resource/3O5i5CBbZG89XwsipeYb6e/view "Convergence | The Forest Resilience Bond Case Study") reviews the FRB’s innovative blended structure, which benefited from early stage development grant funding and concessional investments provided by the Rockefeller Foundation and the Gordon & Betty Moore Foundation, and market rate investment from CSAA Insurance and Calvert Impact Capital. Paying beneficiaries (akin to outcome funders), including the U.S. Forest Service and Yuba Water Agency, will repay investors upon completion of the work. This publication also marks the first time Convergence has conducted a case study on a blended finance transaction in the developed world, showcasing the diversity of blended finance solutions.

 

### What role can Blended Finance play in the response to COVID-19?

 
From the earliest days, it was clear the COVID-19 pandemic posed a serious challenge to progress towards the Sustainable Development Goals, especially in developing countries, with increased market instability and government-imposed regional lockdowns disrupting the flow of goods and services. 

 

[__Here__](https://www.convergence.finance/news-and-events/news/6IhuZ1NULofZ93jpDOIAqK/view "convergence | What role can Blended Finance play in the response to COVID-19?"), Convergence shares how blended finance can help respond to epidemics, and expressed why blended finance will be an important tool in assisting the medium-to-long-term recovery of health systems and economies where development is most needed.

 

### COVID-19, the Sustainable Development Goals, and Blended Finance

 

The impact of COVID-19 began to get clearer by June of 2020. By this time, the data started to emerge; there was an extraction of [USD 90 billion](https://www.unescap.org/blog/financing-sdgs-covid-19 "UNESCAP | Financing the SDGs") of private capital from emerging markets in the first 3 months of 2020 (the largest outflow ever recorded), as developing countries experienced rising debt burdens and depreciating local currencies.

 

[__Here__](https://www.convergence.finance/news-and-events/news/3mh2pgzn6viJg6maXsJCIw/view "Convergence | COVID-19, the Sustainable Development Goals, and Blended Finance"), Convergence shares COVID-19’s impact on the real economy and the SDG agenda, while highlighting challenges well-conditioned for blended finance solutions. 

 

### Blended Finance & the Gender - Climate Nexus

 
As the climate crisis intensifies, it is evident that it is disproportionately affecting women and girls.

 

[__Here__](https://www.convergence.finance/news-and-events/news/q7ggpXug3CNYrKlnL0bfs/view "Convergence | How can blended finance address the gendered impacts of climate change?"), we offer a glimpse into Convergence’s latest Data Brief (available to members only), which explores how blended finance has addressed the gender-climate change nexus to date, and presents insights drawn from interviews conducted with key stakeholders.

 

### Five Tips for Attracting Capital to Blended Finance Vehicles

 
Over the last 5 years, our work to capture blended finance activity, support market acceleration, and match investors and deals, has helped us identify some effective ways to yield “better blending.”

 

[__Here__](https://www.convergence.finance/news-and-events/news/1ZwRLOrlsTMaCpwaLfrFtg/view "Convergence | Five Tips for Attracting Capital to Blended Finance Vehicles"), Convergence shares five steps worth taking to attract capital from funders and investors.

 

### Assessing Gender Lens Investing in Blended Finance

 
Gender equality has become increasingly incorporated in the investment strategies of impact investors and institutional investors. 

 

[__Here__](https://www.convergence.finance/news-and-events/news/3q7aGC3DBXf5KiRRDBErYO/view "Convergence | Assessing Gender Lens Investing in Blended Finance"), we share what we learned from analyzing how gender has featured in the blended finance market, based on our database of over 530 blended finance transactions.

 

### The State of Blended Finance 2020

 
The State of Blended Finance has become an authoritative reference point on the global blended finance market, presenting data and analysis from the largest and most detailed database on historical blended finance transactions.

 

[__The State of Blended Finance 2020__](https://www.convergence.finance/blended-finance/2020 "Convergence | State of Blended Finance 2020 Report") report looks at nearly 600 blended finance transactions, representing aggregate financing of USD 144 billion to date. For the first time, our report also included perspectives from experts in the field and a forecast of where the market is headed, based on Convergence’s in-house knowledge of transactions raising blended capital. The report also reflects upon the blended finance market’s journey to scale, and the role of blended finance in responding to the COVID-19 pandemic.

 

### Four take-aways from seminar series “A closer look at blended finance instruments”

 

In March of 2020, in response to travel bans and a stronger shift towards digitization, Convergence launched a series of virtual trainings to maintain momentum in building capacity in institutions eager to employ blended finance. Our first virtual seminar series, __*A Closer Look at Blended Finance Instruments*__, included eight training sessions on the use of guarantees, technical assistance, design and preparation-stage grants, and concessional capital in blended finance structures. These trainings attracted over 400 attendees from various member and non-member organizations, including development agencies, financial intermediaries, commercial investors and deal sponsors.

 

[__Here__](https://www.convergence.finance/news-and-events/news/4uybIuW7U5mhONPIuvECEs/view "Convergence| Four take-aways from seminar series “A closer look at blended finance instruments”"), Convergence shares a few high-level takeaways from its trainings on blended finance instruments.

 

*__There is a lot more content available on blended finance. Visit our [News & Events](https://www.convergence.finance/news-and-events "Convergence | News & Events") section and [Resource Library](https://www.convergence.finance/resource "Convergence | Resource Library") for more insights, research and perspectives on how to scale blended finance for greater developmental impact.__
*

Convergence shares the articles and publications that received the most interest and engagement in 2020.

Our Most Popular Content on Blended Finance in 2020

[Bamboo Capital Partners (Bamboo)](http://www.bamboocp.com/ "Bamboo Capital Partners") is a specialist impact investor working in frontier and emerging markets with development agencies and financial institutions to advance innovative financing solutions that deliver lasting impact at scale. Bamboo creates growth opportunities to improve the lives of the world’s most marginalized and underserved communities through its investments in businesses that cater to the lowest-income earners. Bamboo has been active for over 10 years in private debt and equity, with investments in Latin America, Asia and Africa, focused on financial inclusion, agribusinesses, and access to clean energy, healthcare and education. Since its launch in 2007, Bamboo has proven that private capital can be profitably deployed as a tool for effective change in addressing low- to middle-income populations in developing countries. 

Given the development of SDG500, a first-of-its-kind blended finance impact investment vehicle, and the increasing shift towards technology and gender lens investing, Convergence connected with Bamboo’s Managing Partners, Jean-Philippe de Schrevel, also the Founder of Bamboo and BlueOrchard Finance, and Florian Kemmerich, to learn more about Bamboo’s investment strategy, views on blended finance across their respective geographies, and strategic priorities to mobilize private investment towards the Sustainable Development Goals (SDGs) and emerging markets. 
 

## Bamboo has been making investments to address challenges facing underserved markets for 13 years. What has the journey been like? What stands out when reflecting on this past decade?
 

__Florian:__ Bamboo was created by Jean-Philippe 7 years after he co-founded Blue Orchard Finance, which initially focused on debt funding in emerging markets, specifically addressing the microfinance sector. Over time, after pioneering landmark blended finance transactions, we learned the need was greater than debt financing in emerging markets. Private equity emerged as an important piece of the puzzle to address underserved populations. So, we started with a private equity fund and then grew into a more exploratory pioneering fund called the Oasis Fund (now closed), which was also sector agnostic, thereby allowing the team to venture into a broad range of sectors. Through the Oasis Fund, we developed a focus on healthcare, clean energy access, education and fintech.

__Jean-Philippe:__ There has been considerable evolution in the field since we started. With experience we learned that in testing new business models and going to the early small and medium enterprise (SME) segment– the “missing middle”–in frontier and Least Development Country (LDC) markets, it is difficult to propose market-based returns and impact and attract significant sources of private capital without de-risking through blended finance. This is a lesson that investors, including impact investors, have learned more recently. Blended finance allows everyone to stick to the mission of true, granular, in the trenches, social and environment impact, and channel the money where it is most needed and most efficient, while offering risk-adjusted, market-based returns to private investors. This is something I would not have recognized 20 years ago. In addition, the evolution of the digitalization of goods and services with technology as the backbone of new business models is also one worth mentioning given its power to improve access and affordability. There has also been a big movement among the asset-owner generation towards profit with purpose. This tells me we are in the era of impact investing. That feels good.

 

## Can you shed some light on Bamboo’s investment thesis and why blended finance as an approach is well-aligned? 
 

__Florian:__ There has been an evolution on this front as well. When we looked at our legacy funds, which were once only private, we asked ourselves: How do we achieve scale? We thought about the small ticket sizes, the need to have local presence in our target geographies, the digital divide across remote regions, and the real and perceived risks of investing in emerging markets in developing countries. And, about 3-4 years ago, we realized we needed to make two big strategic commitments: we needed to (i) embrace technology and focus on it as a key enabler for access to affordable goods and services, and (ii) invest in strategic partnerships to match the investment appetites of private sector investors and meet our desired targets for impact and financial returns. In implementing this strategy, Bamboo was enabled to: 
 

1. __Bring private sector actors and development actors together__, uniting unique skill sets, expertise and resources to meet development challenges, which often means providing the private sector with on-the-ground insight, data and resources to build local understanding and respond to localized issues.
2. __Transform public and philanthropic capital into catalytic capital__, which helps adjust the risk level of a transaction to meet the investment appetite of private investors.
3. __Allow deal sponsors to leverage technical assistance offered by development partners__, further de-risking transactions while improving the probability for positive impact outcomes.
4. __Fundraise with greater ease__, given appropriate risk-return levels that match the investment mandates of institutional and commercial investors.

Blended finance is all about strategic partnerships. It respects the type of capital available, makes it highly efficient, and encourages all participants involved to do what they do best to optimize the expertise and resources available, while staying strongly tied to impact outcomes. It is what makes it well aligned to our institutional priorities and investment strategies.
 

## Bamboo and Palladium Group (Palladium) recently initiated a long-term partnership to mobilize USD 1 billion in impact capital by 2023, convening Bamboo’s knowledge of institutional and private sector investors and track record on impact investing in emerging markets, with Palladium’s pipeline of investible opportunities. Can you talk more about this partnership and the opportunities that exist to scale blended finance?
 

__Jean-Philippe:__ We got along from the very beginning because we were mission aligned. Palladium saw a partnership with Bamboo as a way to round out their advisory and consultancy business. From our perspective, Palladium brings a complimentary client base, expertise, and an opportunity for Bamboo to insert an asset management dimension to the many proposals they are responding to. In fact, a couple of months after signing the deal, we started working on a couple of asset management projects, which will help deepen and broaden the range of projects Bamboo will be managing. It is too early to share more, but we are delighted about this strategic partnership. It is one that is truly mission aligned and skill complementary. 
 

## How has Bamboo historically considered gender in its work and investment strategy, and going forward, how does the team intend to employ a gender lens? 
 

__Jean-Philippe:__ At the beginning, when we were hyper-focused on microfinance, gender lens investing was a natural, built-in dimension of our business, as most of the clients of microfinance institutions are women. As we moved into other sectors like energy, healthcare and smallholder finance in agriculture, we progressively developed the gender dimension of our various investment strategies. We added additional criteria like performance metrics to assess impact, which Marie Puaux, Head of Impact Management, is heading. We also recently welcomed Katherine Milligan as Head Gender & Diversity, to make sure the organization is pursuing a lateral approach to integrating gender and diversity internally and across our investment portfolio. Together, Marie and Katherine are ensuring that Bamboo’s gender lens is taken into account ex-ante, rather than only reported on ex-post, and incorporated throughout our entire investment process. 

 

__Florian:__ Gender is on the forefront for all our funds, and we see a lot of opportunity when we look at the investment landscape for climate and narrowing the digital divide. It is why the work we are doing with CARE and the International Trade Center (ITC) with the [CARE-SheTrades Fund](https://www.shetrades.com/en/projects/shetrades-invest "CARE-SheTrades Fund") is exciting. This partnership is offering a bespoke fund that is effectively convening Bamboo’s asset management and fundraising/fund deployment rigor, and experience structuring transactions, with CARE’s substantial global track record in delivering a gender lens to development challenges, and in offering technical assistance on the ground, with ITC’s capabilities in working with governments in the same geographies we invest in. Our focus is to start in South and Southeast Asia and then double-down in other geographies across Sub Saharan Africa.

 

## Regionally, Convergence has seen a decline in the number of transactions targeting Latin America and the Caribbean in relation to other regions. However, our database suggests renewed interest in the region, with 35% of the transactions currently fundraising on our platform targeting Latin America and the Caribbean. What can you tell us about this uptick? 
 

__Jean-Philippe:__ It is not an easy one. For one, we never abandoned Latin America. Bamboo has one of its three regional offices based in Bogota, Colombia. We have deployed Financial Inclusion Fund 1, Financial Inclusion Fund II, Oasis Fund, and are fundraising for BLOC Latin America throughout the region. It might be fair to say the lesser activity in blended finance in this region is a result of the pull to Africa, given the fast growth population, scale of opportunity and apparent poverty. When looking at development finance institutions (DFIs), their focus is largely in Asia and Africa because there are more LDCs in those regions than in Latin America. 

__Florian:__ Activity on Convergence’s fundraising platform is encouraging. The uptick could be a likely outcome of the increased interest in ESG investing and climate action, and the opportunities to combine financial returns with social and environmental impact especially in forestry and biodiversity. I do expect blended finance activity will increase in this region, given the geopolitical situation and government transitions underway. This rebalancing is important otherwise countries in Latin America will continue to face capital deprivation, placing their economies and people at sizeable risk and vulnerability to future economic, political and environmental shocks. We hope others join us in the region. 
 

## One of the key sectors of focus for Bamboo is healthcare. What are your observations for how blended finance can help advance healthcare solutions? What needs to occur to mobilize private capital and achieve investor confidence in this space? 
 

__Jean-Philippe:__ With regards to primary and secondary healthcare in low-income markets, where we have invested in physical infrastructure development (e.g., chains of hospitals and pharmacies), while we have seen advancements in increasing access to healthcare, financial returns in this space have been difficult to earn. Investing in physical infrastructure is a very challenging business if you do not include technology into the equation (e.g., medical devices and tele-medicine). As a result, Bamboo is refocusing its investment strategies in healthcare to build on technology for access. While we are clearly going into uncharted territory here, we remain equally motivated to attract private sector investment that is commercially driven, which is why our health-tech strategies use a blended finance approach to de-risk these transactions and mobilize greater private capital. 

__Florian:__ Blended finance is the ideal tool to invest in capable structures and embrace technology to deliver business models that have a sustained value and are not dependent on government funding, especially when targeting the ‘last-mile’ population. To attract private investors and mobilize their capital, there needs to be greater alignment across the public sector on pricing to scale affordable access and invite insurers in, who are an important part of the solution framework as they finance these solutions and shape the cost of healthcare. If corporations are able to resolve the price point in the market, that can unlock a huge underserved market in terms of patient acquisition. We also need more understanding on the assembly required to do small investments on the ground with real impact that mobilize large institutional investors, which is why organizations like Convergence are important, given the fragmented nature for how investments are approached in this sector; either with the lens of healthcare delivery (e.g., platforms, healthcare, clinics), pharmaceuticals (e.g., medicine), or health-tech (e.g., medical devices). Blended finance can help companies move beyond corporate venturing and participate in structures that create real health outcomes. At Bamboo, we see blended finance as a vital structuring tool to create synergies amongst all the various actors when designing complex structures targeting healthcare in emerging markets. It is complex and will remain complex. 
 

## Bamboo became a member earlier this year. How has your membership with Convergence supported your work and effort to help deliver on the SDGs and scale financing in developing countries?
 

__Florian:__ What we like about Convergence is its multi-stakeholder view when it comes to core donors, engagement, and channeling information to investors, donors and deal sponsors. The trainings on [blended finance instruments](https://www.convergence.finance/news-and-events/news/4uybIuW7U5mhONPIuvECEs/view "Convergence | Four take-aways from seminar series “A closer look at blended finance instruments”"), and now on the [sector series](https://www.convergence.finance/training "Convergence | Trainings"), are necessary convening grounds as you bring in stakeholders from diverse sectors operating in both the public and private space. On the fundraising side, there has been a learning curve, since we have never worked with a digital platform to assist with raising capital. We do consider the fundraising platform as an important tool as we look to fundraise for SDG500, currently listed on the Convergence platform, which is deep-rooted in public-private partnership and englobes private equity and private debt and six subfunds, including the CARE-SheTrades Fund, a mixed hybrid fund. So, there is a lot to be communicated. We are fully embracing the support from Convergence in identifying some of the newer suspects in the private sector, and in bridging the knowledge gaps in blended finance to accelerate capital commitments targeting the SDGs in developing countries. 

 

## As we approach the end of 2020, what are you most looking forward to at the start of 2021?
 

The vaccine, and to move forward with SDG500, because we believe it is truly scalable and replicable. 

*__Are you interested in becoming a member of Convergence's global network for blended finance? [Tell us you're interested.](https://www.convergence.finance/sign-up "Convergence | Member Sign-up") __*

Convergence connected with Bamboo’s Managing Partners to learn more about their investment strategy, views on blended finance and strategic priorities to mobilize private investment towards the SDGs and emerging markets. 

Member Spotlight with Bamboo's Managing Partners

Member Spotlight with Florian Kemmerich & Jean-Philippe de Schrevel from Bamboo Capital Partners

COVID-19 has pushed many of us to reimagine the way we operate and act on ideas calendared for later. This was true for us at Convergence. Earlier in March, in response to travel bans, Convergence launched a series of virtual trainings to maintain momentum in building capacity in institutions eager to employ blended finance. Our first virtual seminar series, __*A Closer Look at Blended Finance Instruments*__, included eight training sessions on the use of guarantees, technical assistance, design and preparation-stage grants, and concessional capital in blended finance structures. These trainings attracted over 400 attendees from various member and non-member organizations, including development agencies, financial intermediaries, commercial investors and deal sponsors.

Here are some high-level takeaways from our trainings on blended finance instruments:
 

### Guarantees are popular, but no one-size-fits-all solution 
 

Our first training session on guarantees reached full capacity in less than a week, demonstrating the popularity of this blended finance instrument. According to Convergence’s latest __[State of Blended Finance report](https://www.convergence.finance/blended-finance/2020 "The State of Blended Finance 2020")__, guarantees have been consistently used in the market over time, appearing in a third (33%) of transactions, along with risk insurance. 

High perceived risks are a major barrier to increasing private capital investment in many sectors and geographies. Guarantees help shift the risk of capital loss to the guarantor, which increases the mobilization of private capital in regions where the perceived risks rather than real risks deter private investors from committing their capital. However, while guarantees reduce the loss-given-default, they do not alter the probability of default that can limit investor engagement. Further, while many regulated banks and insurance companies require irrevocable and unconditional guarantees to qualify for capital relief, guarantees are issued with varying terms and conditions – not all of them being irrevocable and unconditional. And, guarantees do not substitute for other instruments such as loans, instead, backstop such instruments adding complexity to a transaction.

While guarantees are an important instrument for mobilizing additional private sector financing for developing countries, [they are not](https://www.convergence.finance/news-and-events/news/2ODjLTknchuuvzPWa4rty4/view "Convergence | Are guarantees stuck in the “comfort zone”?") a one-size-fits-all solution.

### Blended finance draws out the complementary skills in partnerships 
 

Some of the most frequently asked questions included: “Who initiates blended finance structures?” and “How do these institutions find each other?” 

The answer was: it is a team effort. Various guest speakers acknowledged that forming the necessary partnerships is an important first step. Designing a blended transaction requires two distinct skill sets, one being financial expertise to develop the right financial structure with appropriate risk-return profiles for funders and investors, and the other, sector-specific expertise to determine interventions that can yield the desired development impact. One speaker aptly described the forming of their partnership with another institution as “a dance.” Consider CARE Enterprises Inc. partnering with the International Trade Center and Bamboo Capital Partners to launch the [CARE-SheTrades Fund](http://www.bamboocp.com/the-international-trade-centre-care-enterprises-and-bamboo-capital-partners-join-forces-to-boost-gender-equality-with-the-care-shetrades-impact-fund/ "Bamboo Capital Partners | CARE-SheTrades Fund") or Climate Policy Initiative partnering with Albion Capital to [develop a new Green FIDC](https://www.convergence.finance/design-funding/grant-portfolio/34Ra3ds5ZKi9TQDTKz26T8/view "Convergence | Design of Green FIDC") (Portuguese for Green Receivables Fund) - an organization with sector-specific knowledge needed to partner up with an institution bringing in the financial expertise.

### Leverage ratios spark vivid discussions
 

![Picture2 Graphic-01-01](//images.ctfassets.net/4cgqlwde6qy0/3gKGWprEVzIAsYwsBMFk41/ead945f4a3defac869f66c2dd4f7c35f/Picture2_Graphic-01-01.png)

In the last seminar “Blending with Concessional & First-loss Capital,” it became clear that leverage ratios remain a controversial topic in blended finance as there is yet to be a standardized method for calculation, or a common view on their value as a metric. Based on Convergence’s analysis of 157 historical blended funds and facilities, leverage ratios average at 1:5. When assessing by region, Convergence presented that average leverage ratios for Latin America have historically been higher than those for Sub-Saharan Africa. These points sparked a vivid discussion among participants, some of who expressed (i) importance for transparency in methodologies used to calculate the leverage ratio (see [this blog](https://www.convergence.finance/news-and-events/news/32YlzPV7lKaCSuEwSoYAua/view "Convergence | New Data Brief") and [this video](https://www.convergence.finance/news-and-events/news/cNoJTrILHm5a9w3y21oyu/view "Convergence | What is leverage in blended finance?") for details on the methodology we applied); and (ii) that even a leverage ratio of 1:1 can be a worthwhile goal, especially in sectors where it is [more difficult to create revenue lines](https://www.convergence.finance/news-and-events/news/1YhpksXLd3hjtGxi43iDNK/view "Convergence | Key ingredient in the blended-finance blend: revenues") and in [geographies deemed risky by commercial investors](https://www.convergence.finance/news-and-events/news/7Cwi1FknKtfqd2vVmgcKIW/view "Getting the Right Blend in Game-Changing Finance").

### There is demand for more technical discussions on designing blended transactions
 

The process of structuring a blended transaction and reaching first close often takes longer than a year. Arguably, even the best guest speakers cannot summarize months of negotiations and design tweaks in a 15-minute presentation. The good news is we have captured the details of structuring a transaction in our case studies, covering various models, from [development impact bonds](https://www.convergence.finance/resource/1AtarfuyM8suugqEO6084Q/view "Convergence Case Study | Utkrisht Impact Bond") to debt funds such as the [Medical Credit Fund](https://www.convergence.finance/resource/3qke8x7gEFCsmKRXi2JD8o/view "Convergence Case Study | Medical Credit Fund"). Therefore, we frequently referred participants to our [Resource Library](https://www.convergence.finance/resource "Convergence | Resource Library") for a deep dive into structuring transactions. 

__*Having concluded this seminar series on blended finance instruments, we have now launched a new seminar series: “Blended Finance in Select Sectors.” Check out our [Training Page](https://www.convergence.finance/training "Convergence | Trainings") to register.*__

Convergence shares key lessons from it's virtual trainings seminar series on guarantees, technical assistance, grants and concessional capital to maintain momentum in building capacity in institutions eager to employ blended finance.

A closer look at blended finance instruments

Four take-aways from seminar series “A closer look at blended finance instruments”

[Allianz Global Investors](https://www.allianzgi.com/ "Allianz Global Investors") (AllianzGI) is part of Allianz Group. AllianzGI is an active asset manager with over 25 offices around the world and more than EUR 546 billion in assets under management. AllianzGI is one of the few large-scale asset managers with a dedicated Development Finance team that has raised more than USD 2 billion in commitments towards development finance strategies since 2016. The Development Finance team is part of a wide private markets platform including the Infrastructure Debt team, which has over 20 years of collective experience in infrastructure investing, globally. 

When it comes to blended finance, AllianzGI works closely with development banks to create investment solutions that support the UN Sustainable Development Goals (SDGs) and promote greater private capital mobilization into emerging and frontier markets. AllianzGI is committed to structuring deals that multiply the impact of every dollar for both the donor and the investor, while also scaling societal impact where it is needed most. 

With plans to expand their sector focus, Convergence connected with Nadia Nikolova, Lead Portfolio Manager of AllianzGI Development Finance, to learn more about AllianzGI’s approach to blended finance, the structuring of investment-grade solutions, and her perspective on how to attract other institutional investors to emerging markets through these blended finance products. 
 

## How did AllianzGI’s journey in blended finance begin?
 

Back in 2015, International Finance Corporation (IFC) was capital constrained and approached AllianzGI to explore ways to mobilize private capital into their respective local markets. At the same time, institutional investors that were clients of ours were seeking to diversify their portfolios into these markets through investment-grade transactions. So, we asked what to us was an obvious question: Why not use structured finance techniques like those utilized by the European Investment Bank’s Project Bond Credit Enhancement product rather than have IFC de-risk on a per project basis? De-risking on a portfolio level is much more capital efficient. It all started over tea and biscuits in our offices. Once we started the partnership with IFC, a process which we really enjoyed, we continued to look for other investments in emerging markets with a blended de-risked profile. 
 

## As one of the two asset management entities of Allianz SE, what is unique to your investment mandate, and why is blended finance a viable structuring approach to invest in emerging markets? 

 
AllianzGI is specialized in alternative investments, particularly in private markets. AllianzGI was one of the first infrastructure debt investors to do direct origination, and we have kept that innovation and first mover approach to many of the new strategies we launch, including Development Finance. As a team, we really have our heart in development finance and creating scalable, lasting sustainable impact. From the start, blended finance was a viable approach because it helped satisfy the requirements of all stakeholders, be it an institutional investor looking for investment-grade transactions, a capital constrained development bank requiring on-demand capital, or an asset manager like us.

 

The structures we create offer an appropriate return for all parties. I think this is paramount for the “future-proofing” of any investment strategy. If you view our approach from an SDG lens, what we really specialize in is partnering for the Goals (SDG 17). Our partnerships with development banks are fundamental to our strategy. We source investments from them, lean on their expertise, co-invest with them, rely on their preferred creditor status and halo effect, and trust their track record. Take this pandemic as an example; it is almost impossible to do deals now without having a local presence. Our team does not have 700 people scattered across the world that have local connections and can carry out due diligence in the field, so in the current situation we are facing, our partnership strategy helps us keep pace in mobilizing capital. Now, for portfolios where we do not have partnerships with development banks, being locally present is very important. For that reason, when we built our Asia Private Credit team, which is making direct investments in mid-cap entities all over Asia; we set up a local team, which now sits in India and Singapore. When you are not investing through partnerships, local presence, particularly in emerging markets, is key. 
 

## Allianz has partnered with IFC to invest in a portfolio of loans IFC issued to infrastructure projects through the [Managed Co-Lending Portfolio Program](https://www.convergence.finance/historical/deal?filters=W10%3D&sort=eyJjb2x1bW4iOiJyZWxldmFuY2UiLCJkaXJlY3Rpb24iOiJkZXNjIn0%3D&keyword=bWNwcA%3D%3D "Convergence HDD | Managed Co-Lending Portfolio Program") (MCPP). The transaction was blended: it received a SIDA guarantee to cover first loss in a portion of the portfolio. Can you share some key learnings or reflections from structuring this blended transaction?

 
We started structuring the IFC vehicle in 2016-17. The market has changed dramatically since. Three years ago, Environmental, Social, and Corporate Governance (ESG) was a new concept. Now, if you do not have an ESG strategy, you are not in the market. There are plenty of lessons learned from the MCPP, including:

 

1. __It is better to go big.__ It takes such a long a time to launch a fund that it is best to build funds that are large scale. If we were to redo the IFC vehicle, we would double the size. There is so much up-front effort put in these structures that it makes sense to leverage on that work.
2. __The power of data is essential for private capital mobilization.__ We were able to participate in the transaction with IFC because they opened their books for us and provided full visibility on their track record for us to do comprehensive due diligence. As a result, we were able to estimate how much first loss we needed for the senior investors to access an investment grade product. If we want this type of structure to be replicated to further mobilize true private capital into emerging markets, the investment performance data and track record of development banks needs to become public. This is why the discussion around the [Global Emerging Markets (GEMs) Risk Database](http://www.gems-riskdatabase.org/ "GEMs Risk Database") is very important. 
3. __Language comprehension is vital.__ Development banks are often not driven by the same issues and concerns as institutional investors. Often, their perspective is driven by a policy requirement which could be obscure to a private investor. The opposite is also true. So, the lessons for me have been two: (i) make no assumptions, ask questions, and (ii) always explain why a certain point is so vital. Once we speak each other’s language, progress is much faster.

 

## In 2019, Allianz became the first large commercial lender to commit long-term funding to a blended Africa-focused infrastructure fund, committing USD110 million in the [Emerging Africa Infrastructure Fund](https://www.convergence.finance/resource/6BYvXp0lws20g6yI6U8oEc/view "Convergence | Emerging Africa Infrastructure Fund Case Study"). What led Allianz to make this commitment, and how has it helped influence future investment decisions? 

 
Having done the MCPP with IFC, AllianzGI was looking for similar types of investments. What does our vehicle with IFC look like? It is a diversified portfolio of infrastructure loans – infrastructure being core to our DNA. So, we were looking for investment-grade infrastructure-focused opportunities in emerging markets, and unfortunately, these are limited. One of the reasons we decided on investing in the Emerging Africa Infrastructure Fund–where we are a lender and not an equity investor –is because it presented very similar characteristics to the MCPP; it already had an established portfolio of infrastructure loans with a track record over 10 years, it was a well-managed vehicle, and there was a clear alignment of interest and a substantial amount of first loss - that diversification attracted us. 

 
IFC played a significant role in getting us to think about how we want to invest in emerging markets. Our basic investment thesis is that our investors are looking for large-scale attractive investment opportunities with investment-grade type characteristics. In investment-grade countries in Latin America, we do direct origination of single large transactions. As we move up the risk scale, we seek to invest in diversified uncorrelated portfolios, both from a sector and geography perspectives. The more frontier the markets we enter, the more de-risking and first loss our investors require. 

Before our partnership with IFC, we were focused on large-scale, individual investment-grade transactions in emerging markets. What we have done with IFC and the Emerging Africa Infrastructure Fund is tap into the significantly larger pool of non-investment grade opportunities, and through structured finance, have converted them into scalable investment grade portfolios for our clients.
 

## In some ways, COVID-19 has turbocharged the need for coordinated efforts among diverse investor groups. Has there been any activity or dialogue in the last 6-8 months that has been particularly encouraging for AllianzGI?
 

There has been a greater sense of urgency, which we have welcomed. One response to the COVID-19 pandemic that has stood out to us came from MIGA, part of the World Bank Group. Around March-April, they saw emerging market sovereigns and sub-sovereigns were starved for funding and experiencing significant capital outflows. This made it ever more challenging for them to acquire the necessary medical equipment, support their healthcare sector, inject liquidity in the system, and so on. To address this, MIGA decided to leverage its existing sovereign guarantee product but repositioned it and put it on a fast-track to provide urgent liquidity to these countries. Using one of our blended strategies, AllianzGI together with Allianz, created a program that allowed us to invest in MIGA guaranteed facilities alongside commercial banks and support COVID-19 relief. That sense of urgency and ability to take off the shelf products and expedite processes, has been very helpful. 

Hopefully, this sense of urgency will systemically filter into the system in a more meaningful way to increase investment in investible SDG-related projects across developing countries. 
 

## AllianzGI is now moving away from ad-hoc investment opportunities to being more strategic. When it comes to blended finance, what is changing?
 

We respond to the market when it is needed, but we also have a long-term vision of where we need to go, whether that is cultivating partnerships with development banks, or operating vehicles that open us up to an entire syndication market. I would say our strategy is two-fold: (i) Through our blended funds and partnerships, investing in vehicles that target riskier markets, and expanding our sector focus to include both infrastructure but also projects focused on addressing gender inequality and social inequalities, and (ii) remaining opportunistic to respond to crises like COVID-19; achieving the SDGs is now a crisis, so we need to respond accordingly as a responsible investor. 

The key issues we face when trying to solve some of these development challenges and increase institutional investment in emerging markets is sourcing the necessary first loss and originating individual transactions. For the new strategies we have in mind, we have a much larger investment scope that might range from existing SDGs¬ aligned investing to participating in gender-related bonds or partnering with commercial banks for sustainable investing in a certain developing region.
 

## Do you think institutional investors like AllianzGI want to get more involved in blended finance and, if so, what is needed to get institutional investors more active in blended finance in regions where there may be higher risk, real or perceived?
 

We need a couple of things:

1. __The GEMs Database to be published__, so that we have investment performance data and a historic track in these jurisdictions. 
2. __A visible and tangible pipeline of projects__, so that we can build substantially diversified scalable portfolios–no investor is going to commit capital if they do not believe it will be deployed.
3. __MDBs and DFIs to actively include institutional investors in their deal syndication__ rather than follow well trotted paths of other DFI and banks syndications 
4. __More first-loss__; most of our funds have a 4-8x mobilization effect, meaning every dollar of public capital, we mobilize $4-8 of private investment. It therefore makes sense to put donor capital in a portfolio of uncorrelated risk to maximize the impact of every donor dollar.

 

## What else would you like to communicate to the market?
 

To start, blending on an individual transaction level is capital inefficient for the donor. Under this scheme, attracting large pools of institutional capital to emerging markets would require such high degree of blending that it becomes unfathomable. For this reason, a [portfolio approach](https://www.convergence.finance/resource/3cpgfofIUn2QY8rFEV2IFt/view?utm_source=Webinar%20Blog&utm_medium=website&utm_campaign=MobilizingPSRR "Convergence | How to Mobilize Private Investment At Scale in Blended Finance") is one that should be considered. Secondly, partnerships are very important to us, and it is something we stand for. We are always open to discuss new opportunities with players in the market 

To end, blended finance does not have to be concessionary for anyone. Everyone can receive an appropriate return for the risk they are taking and satisfy their investment strategy, which is very different for a donor than it is for an institutional investor who must comply with credential regulations. For blended finance to be a sustainable strategy, we must prove that there is enough return even for donors so that their capital can over time be substituted by private capital as well. 

*__Are you interested in becoming a member of Convergence's global network for blended finance? [Tell us you're interested.](https://www.convergence.finance/sign-up "Convergence | Member Sign-up") __*

Convergence connected with Nadia Nikolova, Lead Portfolio Manager of AllianzGI Development Finance, to learn more about AllianzGI’s approach to blended finance, the structuring of investment-grade solutions, and how to attract institutional capital.

Member Spotlight with Nadia Nikolova from AllianzGI

Member Spotlight with Nadia Nikolova from Allianz Global Investors

In 2017, Convergence [awarded](https://www.convergence.finance/news-and-events/news/11m8TkG7U0SSyQ6Q2MCIIu/view "Convergence | Convergence awards design grant to Africa GreenCo, an intermediary off-taker and aggregator of renewable energy projects in Sub-Saharan Africa") a design-stage grant to Africa GreenCo, for the design of an intermediary off-taker and aggregator of renewable energy projects across Sub-Saharan Africa, to attract private sector investment. 

In late October of this year, Africa GreenCo with its Lusaka-based operating company GreenCo Power Services (together GreenCo), received an investment of USD 1.5 million from Denmark’s Investment Fund for Developing Countries (IFU) and Private Infrastructure Development Group’s InfraCo Africa (InfraCo), completing GreenCo’s operational establishment in Lusaka as an intermediary renewable energy buyer/supplier and power services provider. It is anticipated this is a precursor to the 2021 capitalization of GreenCo's support for independent power projects.

Convergence is thrilled to see the operationalization of this new business model to scale up renewable energy in Zambia and subsequently other countries in Southern Africa.

In sharing the news, Cathy Oxby, Chief Commercial Officer at Africa GreenCo expressed, "Convergence was instrumental in supporting us at a key stage of development for our business – without Convergence it would have been impossible for us to demonstrate that only via innovative out-of-the-box new business models can we assist in the development of electricity markets in Southern Africa."

To learn more, visit [Africa GreenCo](https://africagreenco.com/announcing-the-operationalisation-of-a-new-business-model-to-scale-up-renewable-energy-in-zambia/ "Africa GreenCo Announces Operationalization"). 

Convergence Design Funding Grantee Africa GreenCo becomes operational to scale up renewable energy in Zambia and Southern Africa, with an investment of USD 1.5 million from IFU and InfraCo Africa.

Convergence Grantee Africa GreenCo Becomes Operational

Convergence Design Funding Grantee Africa GreenCo Becomes Operational with USD 1.5 Million Investment

__Toronto, 29 October 2020__ - Convergence, the global network for blended finance, launched the 4th edition of the State of Blended Finance today. 

[The State of Blended Finance 2020](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view "Convergence | The State of Blended Finance 2020 ") provides an updated analysis of the blended finance market, including blending approaches, sectors, regions and investor trends. For the first time, it also includes perspectives from experts in the field and a forecast of where the market is headed, based on Convergence’s in-house knowledge of transactions raising blended capital. The report also reflects upon the blended finance market’s journey to scale, and the role of blended finance in responding to the COVID-19 pandemic.

“Since our inaugural report in 2017, blended finance has entered the mainstream as a serious structuring approach for mobilizing additional capital for sustainable development,” says Joan Larrea, CEO at Convergence. “The conversation has moved beyond whether blended finance is part of the solution to figuring out how we can best approach blended finance to move billions towards developing markets.”

To date, based on Convergence’s data, blended finance has mobilized nearly $144 billion. The blended finance market has delivered a consistent 45-50 transactions per year since 2015, with 45 launched in 2019 (collected so far), with some transactions larger than $5 billion. Convergence maintains that for the blended finance market to reach scale, it is crucial that structures reach a level of standardization and simplicity that appeal to the mandates of institutional investors.

Funds (e.g., equity funds, debt funds, and funds-of-funds) continue to account for the largest share of blended finance transactions (38% of transactions over 2017-2019, and 43% historically), indicating that these structures have achieved a level of efficiency in the market. However, we are also seeing structures diversify; notably, bonds and notes are growing more popular, accounting for 16% of transactions in 2017-19; 65% of the bonds and notes captured in Convergence’s database were launched in the last three years. 

Blended finance transactions across all time periods have been most concentrated on energy and financial services. Using Convergence’s live deals database as a leading indicator, increased momentum can be expected in agriculture, health, and, to a certain extent, education in the coming years. 

The COVID-19 pandemic has placed a greater spotlight on financing healthcare. The financing gap facing global health, projected to reach $371 billion annually by 2030, is expected to increase due to the pandemic. According to the Convergence database, blended finance has been particularly useful in crowding in capital for the delivery of health services, SME financing, and pharmaceuticals and vaccinations. 

Challenges for blended finance transactions looking to achieve scale include a lack of a robust pipeline of bankable projects due to small transaction sizes, complex and unfamiliar structures, and continued silos between the donor community and the private sector. Encouragingly, The State of Blended Finance 2020 identifies a shift towards less complex blended finance transactions, noting transactions launched between 2017-2019 less likely to employ multiple blending approaches in a single structure (e.g., concessional debt or equity and technical assistance grants), indicating a preliminary but positive step towards more streamlined vehicles. 

Overall, for blended finance to mobilize private capital at scale and meet the challenge of COVID-19, Convergence calls for concessional finance to become more efficient, prioritizing portfolio approaches and simplifying structures, while embracing greater transparency and targeting capacity-building amongst local institutional investors. 

__ABOUT THE STATE OF BLENDED FINANCE REPORT 2020__

Convergence focuses exclusively on blended finance to catalyze private investment. This year’s [report](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view "Convergence | The State of Blended Finance 2020 ") looks at over 4,200 financial commitments to nearly 600 blended finance transactions, representing nearly $144 billion in aggregate financing (as of September 2020). This report includes perspectives from ADM Capital Foundation, Asian Development Bank (ADB), Development Bank of Southern Africa (DBSA), GuarantCo, International Finance Corporation (IFC), Liquidnet, Organization for Economic Development and Coordination (OECD), Sanlam Investments, Shell Foundation, (the UK-based charity), and responsAbility Investments AG. 

__ABOUT CONVERGENCE__ 

[Convergence](https://www.convergence.finance "Convergence") is the global network for blended finance, and generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence also has a design funding program to support the launch and design of innovative blended finance vehicles that aim to attract private capital at scale. 

View our [Blended Finance Primer](https://www.convergence.finance/blended-finance "Convergence | Blended Finance") on everything blended finance, and for a preview of data from our database (full database only available to members). To find out more, visit: [www.convergence.finance](https://www.convergence.finance "Convergence"). 

__MEDIA CONTACT __

Namrata Narayan
Head of Communications
Tel.: +1 647-886-7179 
namrata.narayan@convergence.finance 


The State of Blended Finance 2020

Convergence launches the State of Blended Finance 2020 report, its annual report on trends, challenges and opportunities in blended finance. This year's report addresses ways to turbocharge the market to achieve scale and advance the SDGs.

Convergence Launches the State of Blended Finance 2020

The State of Blended Finance 2020 Addresses Ways to Turbocharge the Market to Achieve Scale and Advance the SDGs

*This article was originally published on [Business Day](https://businessday.ng/opinion/article/why-nigerias-domestic-institutional-investors-need-to-focus-on-infrastructure-and-blended-finance/ "Why Nigeria’s domestic institutional investors need to focus on infrastructure and blended finance")*

 
Nigeria’s domestic institutional investors, whose portfolios comprise a significant percentage of Nigerian government paper, are facing unprecedented losses as rising inflation creates negative real yields. To preserve capital, domestic institutional investors will need to diversify their portfolios and consider alternative asset classes. 

 

Nigeria’s economy has encountered multiple hits in the recent past. Inflation stands high at [13.39%](https://www.statista.com/statistics/383132/inflation-rate-in-nigeria/ "Statista | Inflation Rate in Nigeria"). Exacerbating an already difficult macroeconomic environment is the persisting COVID-19 pandemic, deep currency devaluation, declining levels of government revenues (reported as only 7% of GDP, and largely applied to servicing debt), and ballooning public debt currently estimated at [USD 84 billion](https://www.afdb.org/en/documents/african-economic-outlook-2020 "AFDB | African Economic Outlook 2020").

More diverse portfolios that leverage blended finance, the strategic use of concessional capital as a risk buffer, could help spread risk and create better performing portfolios. Moreover, long-term yield generating, inflation-linked asset classes such as infrastructure provide a viable alternative to government securities, with predictable and stable cash flows. Channeling larger volumes of institutional capital towards infrastructure and other asset classes can create positive externalities for the struggling Nigerian economy.

The IMF estimates Nigeria’s infrastructure stock at 25% of GDP, well below the global average of 70%. It will require annual financing of [__USD 100 billion over the next 30 years__](https://www.pencom.gov.ng/wp-content/uploads/2017/04/Bridging_Nigeria_Infrastructure_Gap-1.ppt "PenCom | Bridging Nigeria's Infrastructure Gap") to address this deficit. The multiplier effect created by robust and high quality infrastructure is well documented. The [economic return](http://www.pwc.com/cpi-outlook2025 "PWC | CPI Outlook 2025") averages 5 – 25% for every dollar spent, leading to inclusive economic growth, job creation, a stronger business enabling environment, and an improvement in living conditions given the provision of basic public services. In addition, national productivity and competitiveness are often higher in countries with adequate infrastructure. Sustaining strategic infrastructure investment is therefore a critical and urgent requirement to transform Nigeria’s economic trajectory and to help it achieve its industrialization aspiration. However, it is clear that alternative sources of capital are required, given the already stressed public purse.

Pension assets alone account for N10.8 trillion (about USD 28 billion), but most of these funds are invested in government securities, whose yields have turned negative in real terms due to rising inflation. Given the inelasticity of demand for infrastructure and its stable cash flows, it is well aligned to the investment needs of pension funds. The participation of other institutional investors, such as insurance companies (with assets valued at about USD 467 million for life insurance and about USD 648 million for non- life) and the Nigerian Sovereign Investment Authority (NSIA – the Sovereign Wealth Fund), are equally important. And, infrastructure facilitates the long-term asset-liability matching requirements of these investors.

In the immediate term, given the on-going portfolio losses of domestic institutional investors in the country, focus should be placed on alternative products and instruments that can be underpinned by blended finance approaches to preserve capital. 

The following examples are illustrative of the multiple possibilities available:
 

__1. Infrastructure Project Syndications__
 

Overall, syndications enable risk sharing. Prior to the 2008 global financial crisis, when market conditions were favorable, infrastructure projects were largely financed by syndicates of commercial banks or with underwriters selling down a portion of the debt to other lenders. However, with the 2008 financial crisis came stringent capital adequacy requirements, including [Basel III](https://www.fsb.org/work-of-the-fsb/implementation-monitoring/monitoring-of-priority-areas/basel-iii/ "FSB | Basel III"), significantly constraining banks and declining bank syndications.

Infrastructure assets can provide banks and asset owners with higher yields through syndications. This is a more attractive investment option than government securities, which are diminished by rising inflation rates. Through infrastructure assets, banks can utilize their expertise in structuring and appraising infrastructure projects to syndicate loans with groups of domestic institutional investors who could provide longer tenors that match the overall project life, and additionally achieve better long-term asset-liability matching in their own balance sheets. Qualified reputable banks and Development Finance Institutions (DFIs) can serve as the Mandated Lead Arranger (MLA) and lender of record (with preferred creditor status for the DFIs) to undertake the due diligence, appraisal, risk analysis and management, and ensure adequate pricing to generate attractive risk-adjusted returns for all.

Blended finance can be applied through early stage project preparation grants and credit enhancement instruments where necessary. The International Finance Corporation’s (IFC) [Managed Co-Lending Portfolio Program](https://www.ifc.org/wps/wcm/connect/2458ed31-8c1d-4242-860c-273865976c46/MCPP+Overview+Flyer+2018.pdf?MOD=AJPERES&CVID=mco9eqz "IFC | MCPP") (MCPP) is an example of a blended finance syndications platform that creates diversified portfolios of emerging market private sector loans to grant investors exposure to this asset class. It has raised over USD 7 billion from eight investors; which has been channeled to 96 commercially structured projects (a quarter of which are infrastructure) in 37 countries (a quarter of which are African). Through it’s A/B Loan program, it enables institutional investors to establish an investment vehicle and contract IFC to originate transactions. IFC is the lender of record, while investors participate through B Loans. This structure has raised USD 1.6 billion from Allianz, AXA, and Prudential. It has further raised USD 1.5 billion from Munich RE, Swiss RE, and Liberty Mutual Insurance; which can use unfunded structures to provide IFC with credit insurance or risk guarantees. Again, IFC lends for its own account, with the insurers’ credit coverage on a portion of the portfolio. Credit enhancement to improve the risk-return profile for investors is provided through IFC’s first-loss tranche; which is in turn backed by a guarantee from the Swedish International Development Cooperation Agency (Sida). This model can be adapted and replicated by local banks and regional DFIs to catalyze domestic institutional capital.

__2. Blended Finance Infrastructure Project Bonds__
 

Infrastructure project bonds can be issued during the operating phase when cash flows are stable, with the bond maturity aligning with the overall project life. Credit-enhancement can be an effective approach to enable participation from a broader group of investors, given the restrictions on some investors from investing in sub-investment grade instruments. [InfraCredit](https://www.convergence.finance/news-and-events/news/4xdSPsVlp0De9HWthT4mvA/view "Convergence | InfraCredit"), a blended finance facility that provides local currency guarantees to improve the credit quality of infrastructure debt instruments, is an important player in attracting larger volumes of financing from domestic institutional investors.

For instance, [InfraCredit’s guarantee](https://infracredit.ng/portfolio-items/transitioning-to-a-low-carbon-economy/ "InfraCredit | Transitioning to a Low Carbon Economy") to North South Power for its February 2019 issuance of N8.5 billion 15-year Series 1 Guaranteed Fixed Rate Senior Green Infrastructure Bonds received a rating of AAA from Agusto & Co. and Global Credit Ratings Co. The issuer is rated A. This was the first certified corporate green bond in Nigeria and was oversubscribed, with firm commitments from 11 pension funds. Replicating this type of transaction would create a larger pool of attractive investment opportunities for domestic institutional investors, while benefitting the economy.

__3. Blended Finance Securitizations__
 

Whether through securitizing individual loans or receivables, or pooling large numbers of debt obligations, and issuing fixed income securities, this approach provides varying yields and can attract a spectrum of investors with differing risk appetites. Notably, the avalanche created by this instrument during the 2008 global financial crisis has introduced stricter requirements around transparency and the quality of the underlying assets. Mechanisms like the Capital Tool Company’s Trefi Technology Platform exist to provide real-time visibility on the performance of the assets underlying securitization transactions. Trefi is in use in the [IMFACT](https://www.convergence.finance/news-and-events/news/6JZ3PVDeRyAdGHh6t7S8PI/view "Convergence | Grant awarded to pilot 'SHIFT KENYA', first of its kind model to increase access to finance for healthcare SMEs") healthcare securitization transaction in Kenya that was supported by Convergence in 2019. The vehicle provides a first-loss layer of protection and access to a collateralized portfolio of receivables through which investment grade notes are issued.

Structured blended finance products can provide attractive investment opportunities to domestic institutional investors without altering their commercial mandates and objectives. By leveraging products and instruments that mirror the structured finance products they are already familiar, blended finance can help improve the quality and pipeline of bankable infrastructure projects to drive long-term economic transformation in Nigeria, without exacerbating the public debt burden.

The bottom line is this – the current market conditions are not favorable for domestic investors who are seeing value destroyed by the rising rate of inflation. The on-going pandemic and difficult macroeconomic conditions suggest little respite for investors in the short/medium-term. Domestic investors must therefore urgently consider alternative asset classes to preserve their capital and identify a pathway for consistent income and capital appreciation. Infrastructure assets structured through blended finance approaches might be their best bet.

Convergence's MD for Africa highlights how blended finance could help spread risk and create better performing portfolios for Nigeria's domestic institutional investors, and why infrastructure assets are better performing and higher yielding investments.

A Case for Infrastructure & Blended Finance for Nigeria

Why Nigeria’s Domestic Institutional Investors Need to Focus on Infrastructure and Blended Finance

Climate change is not gender neutral. As the climate crisis intensifies, it is evident that women and girls disproportionately bear the brunt of its impact. In developing countries, women are overrepresented in the informal sector and have greater responsibility for subsistence activities, leaving them more vulnerable to climate-related shocks. Lower access to finance and education further restricts their ability to prepare for and respond to these shocks. Finally, women and girls are also more exposed to gender-based violence (GBV) in the aftermath of climate-risk events. 

Convergence’s latest [Data Brief](https://www.convergence.finance/resource/7zmK3a7wEGmtWqGqSycsIF/view "Convergence | Blended Finance & the Gender-Climate Nexus") explores how blended finance has addressed the gender-climate change nexus to date, and presents insights drawn from interviews conducted with key stakeholders. The Convergence database has recorded 63 blended transactions focusing on SDG 5 (Gender Equality) and one or more of the following SDGs: 7 (Clean Energy), 11 (Sustainable Cities), 12 (Responsible Consumption), 13 (Climate Action), 14 (Life Below Water) or 15 (Life on Land). This represents aggregate financing of USD 6 billion. To date, blended finance transactions targeting gender and climate change have focused mostly on off-grid and renewable energy (33% of transactions) and agriculture finance / sustainable agriculture (19%).

Here are some key takeaways from the Brief:
 

__Funds and companies are the most frequent blended structures in gender and climate change:__ Mirroring the overall blended finance market, funds were the blended structure of choice in nearly half (46%) of transactions targeting gender and climate change, while companies were more prominent than in the broader market (25% vs 17%). Meanwhile, projects have been less prominent (16%), and bonds have played a negligible role. 

__Climate and renewable energy-focused institutions have incorporated gender-lens strategies into their investment processes:__ Institutions focused on climate change and renewable energy like Green Climate Fund (6 concessional commitments in the gender-climate nexus) and Shell Foundation (6) have prioritized [gender considerations](https://www.convergence.finance/news-and-events/news/7qPqWJompgLDEMLeyNDk0H/view "Convergence | Who are the top investors in gender-related blended finance deals?") in their investment processes. Overall, development agencies and multi-donor funds have provided 46% of concessional capital commitments in the gender-climate nexus, led by the United States Agency for International Development (USAID) (20 concessional commitments).

__Women appear more as end beneficiaries rather than direct beneficiaries in blended finance transactions for gender and climate change:__ Women were the direct beneficiaries of 6% of transactions in the gender-climate change nexus. Individuals are rarely the direct beneficiaries of blended finance transactions. What occurs more often (in 43% of gender-climate transactions) is that the direct beneficiaries are micro, small and medium-sized businesses (MSMEs) that may then serve or cater to women in a certain capacity. 

__New, longer-term financing approaches are needed:__ While there is more understanding around the business case for gender and climate change, difficulties remain in terms of designing and implementing commercial projects in the space. Donors and the private sector must explore new, longer-term financing approaches, given that changes in climate and in cultural norms for gender are longer-term, generational processes that cannot be adequately measured on shorter-term time horizons, or adequately captured in traditional reporting processes. 

![Figure-2--Transactions-by-blending-archetype(s)-deployed](//images.ctfassets.net/4cgqlwde6qy0/6JiQbmrz1mv1sC3xFXX4Mq/88b9d8670190d836265b7caa39691e59/Figure-2--Transactions-by-blending-archetype_s_-deployed.jpg)

In this brief, Convergence also argues that early-stage grant support in the form of design funding can aid in market acceleration, potentially increasing the size and scale of projects that come to light within the gender and climate change nexus.
 

*__Convergence is a non-profit dedicated to building and accelerating the blended finance market, with a global membership community of philanthropic, public, and private investors and sponsors of transactions and funds. As a member, you receive access to a wide range of proprietary blended finance data and market intelligence, including our Data Briefs, that benchmark blended finance trends, good practices, and opportunities 
to ultimately unlock additional SDG financing in emerging and frontier markets. Interested in gaining access to our Data Briefs? [Sign-up for membership](https://www.convergence.finance/sign-up "Convergence | Sign-up").__ *

Convergence's latest Data Brief explores how blended finance has addressed the gender-climate change nexus to date, and presents insights drawn from interviews conducted with key stakeholders.

How blended finance can address the gender-climate nexus

How can blended finance address the gendered impacts of climate change?

Recently, Convergence participated in the Criterion Institute’s “Convergence XVII: Financing the reduction of gender-based violence” [conference](https://criterioninstitute.org/convergence/your-invitation-to-move-ideas-to-action-convergence-our-reimagined-digital-conference "Criterion Institute | Convergence XVII: Financing the reduction of gender-based violence"). Reducing gender-based violence (GBV) is key to realizing equal rights and opportunities across genders. Yet, GBV seldom gets the same attention as other gender-related topics, such as equal access to resources, equal representation in decision-making, and equal pay. 

Convergence – our firm that is, not Criterion’s fortuitously named event – is the global network for blended finance. We have built a membership that includes private investors looking to diversify their portfolios, businesses seeking capital, as well as public agencies and philanthropic foundations, all focused to drive capital towards projects aiming to achieve the Sustainable Development Goals. In learning more about the role of finance in addressing GBV, Convergence has identified ways its community can help reduce violence against women and girls. 

Here, we share some of those approaches. In doing so, it is important to recognize that efforts to reduce GBV must be met with a strong understanding of the local culture, people and history, and adequate local representation. Without this awareness and connectedness, good actions can lead to bad unintended consequences. Consulting gender specialists and local stakeholders before implementing any action or strategy is therefore crucial.
 

## 1. Identify and support companies and projects that work to reduce gender-based violence
 

The most straightforward strategy discussed at Criterion Institute’s conference is to support social enterprises whose business models address GBV directly. One example is the Nepalese company [Fightback](https://fightbacknepal.com/ "Fightback"), which provides mental, vocal and physical self-defense training to girls and young women to reduce and mitigate the risk of sexual violence. Fightback was one of [75 businesses](https://www.springaccelerator.org/who-we-are/partners/ "75 businesses") that received support from the SPRING accelerator, a 5-year program for businesses to innovate and improve the lives of adolescent girls across East Africa and South Asia. This accelerator was backed by three Convergence members; the UK’s Department for International Development, the U.S. Agency for International Development and the Australian Department of Foreign Affairs and Trade. This [newly released report](https://static1.squarespace.com/static/5b156e3bf2e6b10bb0788609/t/5f3daa486324e8642c0d031a/1597876821091/Innovating+to+Address+GBV+Final+081920.pdf "IDIA | Innovating to Address Gender-Based Violence") by the International Development Innovation Alliance’s Gender & Innovation Working Group lists a range of enterprises, projects and approaches that help prevent and reduce GBV.

 

## 2. Design or invest in financial structures that aim to increase women’s economic independence 
 

Among the many reasons why women affected by violence cannot just leave the situation is because they lack control over financial resources. Designing and investing in transactions that enable women to access capital, whether for education or for their business, is one way to mitigate GBV and place women and girls in positions of power. 

[Chancen International](https://chancen.international/ "Chancen International"), a Convergence member, shows how this can be done. The social enterprise with offices in Germany and Rwanda designed the Future of Work Fund, a USD 20 million debt vehicle that enables women and men to obtain tertiary education. The fund pays for their education up front, and students repay after graduating, using a percentage of their income over a number of years. In comparison with traditional student loans, these so-called income share agreements (ISAs) do not require any collateral and are designed so graduates only pay when they earn above the minimum income threshold. 

[MCE Social Capital](https://www.mcesocap.org/about-us "MCE Social Capital"), a non-profit impact investing firm, has developed a loan guarantee model to generate economic opportunity for women and families living in poverty. MCE uses these guarantees to lend to microfinance institutions and small and medium-sized enterprises (SMEs) in developing countries. It has so far disbursed more than USD 200 million in loans, reaching 55 countries. Lastly, the [CARE-SheTrades Fund](http://www.bamboocp.com/the-international-trade-centre-care-enterprises-and-bamboo-capital-partners-join-forces-to-boost-gender-equality-with-the-care-shetrades-impact-fund/ "CARE-SheTrades Fund"), a partnership between CARE Enterprises Inc., Convergence member Bamboo Capital, and the International Trade Centre (ITC), lends to women-led and women-owned businesses in [South and Southeast Asia](https://www.convergence.finance/news-and-events/news/4TEBJjU9fzApNJ9rdmZOEm/view "Convergence | Blended Finance and Gender-Lens Investing"). Its target size of USD 75 million is composed of a senior tranche of USD 60 million and USD 15 million as first loss capital.

 

## 3. Partner with media companies that address how gender norms are being portrayed 
 

In many sessions at Criterion Institute’s conference, participants reiterated the need to transform gender norms and fight bias. Given that the media influences social attitudes and norms, partnering with advertisement agencies, radio stations, and media companies that address how gender norms are portrayed, and are actively working to break away from biases, for example against [LGBTQI people](https://www.convergence.finance/resource/76LKQgvu9fWYgHAFLR8KnC/view "Convergence | Investing with an LGBTQI lens - Rethinking Gender Analysis Across Investing Fields"), is therefore another approach to help reduce GBV.

[The Media Development Investment Fund](https://www.mdif.org/ "The Media Development Investment Fund"), a Convergence member, provides affordable debt and equity to SMEs in the media sector with high social impact. In this [case study](https://www.convergence.finance/resource/6Sr4O5FBxin7Jh5aBXe6nQ/view "Media Development Investment Fund Case Study"), Convergence reflects on the fund manager’s history in providing over USD 200 million in loans and equity investments as well as USD 30 million in technical assistance grants to over 120 independent media companies across 42 countries. Amongst others, the fund works with Radio Daljir, a Somalian radio station that covers topics such as gender, education, and health. 

 

## 4. Adopt internal organizational policies that address GBV and continue conversations 
 

Institutionalizing a zero-tolerance policy towards GBV, both internally and in affiliated/invested projects, is another step forward. For internal gender violence considerations, [this resource](https://malechampionsofchange.com/wp-content/uploads/2020/07/Employees-who-use-domestic-and-family-violence_FINAL.pdf "Employees who use domestic & family violence: A workplace response ") offers guidance in addressing and tackling challenges in the workplace. Additionally, investors should integrate GBV considerations in their due diligence process (see [this guide](https://www.unicef.org/documents/mitigating-risks-gender-based-violence-due-diligence-guide-investing "UNICEF | Mitigating the Risks of Gender-Based Violence: A Due Diligence Guide for Investing") for investors and [this letter of intent](https://criterioninstitute.org/engage/letter-of-intent-seeking-investments-that-address-gender-based-violence "Criterion Institute | Letter of Intent Seeking Investments that Address Gender-based Violence")). Not only is this good practice to reduce investment risk, but it also signals commitment to reduce GBV to potential investees. 

GBV data and resources need to be translated and connected with financial performance, ideally by financial experts, so that investors can put relevant data to better use. Integrating GBV research into methodologies that assess market risk of investments and pricing these risks appropriately would strengthen investors’ decision-making about where to place their capital. 

Last but not least, leaders are encouraged to ensure GBV remains a part of regular discourse within their organizations to ensure related issues come to the surface. 

The conversations hosted by Criterion Institute have allowed impact investors, civil society organizations, and development practitioners to huddle together to act on GBV. As the leading market builder for blended finance, Convergence will continue to participate in discussions that will introduce new pathways for how blended finance can aid the fight against GBV.

*__Are you working on a blended finance transaction addressing gender-based violence? [Contact us](https://www.convergence.finance/contact "Convergence | Contact Us") to learn more about opportunities to gain visibility with funders and investors in the Convergence network, or check out our [Resource Library](https://www.convergence.finance/resource "Convergence | Resource Library") to learn about blended finance advancing SDG 5.__*

In learning more about the role of finance in addressing GBV, Convergence has identified ways its community can help reduce violence against women and girls. 

What can Blended Finance Do to Address Gender-based Violence

What can the Blended Finance World Do to Address Gender-based Violence?

[SunFunder](https://www.sunfunder.com/ "SunFunder") is a specialist debt provider and fund manager based in Nairobi and London, financing solar energy companies and projects in Sub-Saharan Africa and Asia, where there is often limited access to reliable and affordable electricity. 

As one of the few debt providers for solar financing in emerging markets, SunFunder has unlocked USD 150 million in debt financing through public and private investors and has financed over 50 solar companies and projects. Through blended debt funds–blending catalytic capital with private capital– SunFunder is working towards __Sustainable Development Goal (SDG) 7–Clean and Affordable Energy__, with an interest in increasing commercial investment in solar lighting, home systems, mini-grids, agri-solar, and commercial solar projects.

With plans to unlock billions for solar financing, Convergence connected with Ryan Levinson, Co-founder and CEO of SunFunder, to learn more about solar financing, debt funds and the impact of COVID-19 in advancing affordable clean energy in emerging markets.
 
## What made you decide to address solar finance given the multitude of development challenges in emerging economies? 
 

It was based on the dual passion Audrey Desiderato, SunFunder’s other co-Founder, and I had, regarding the world’s pervasive development challenges, specifically around energy poverty and the current and worsening climate crisis. In 2012 when SunFunder was born, we believed financing clean energy in emerging markets was an ideal way to hit on those two big issues. Therefore, our mission is very much oriented towards contributing to solutions that address both clean energy and access to affordable energy in emerging markets and underserved communities around the world. 

Choosing solar finance boils down to the technological viability and affordability of this clean energy source. When I began financing solar projects at Wells Fargo in 2007, total installation costs for Solar PV Systems averaged around $6 to $7/Watt. We have seen the cost drop dramatically over the past 10 years. Now, that same system costs about $1-2/Watt – that is around an 80% drop in the cost of solar project installations. The technology has gone from being one of the most expensive sources of energy in the world to one of the cheapest. When you partner that with battery technology, which enables solar energy to be the around-the-clock solution, the combination is ideal in delivering affordable, clean energy that is scalable, especially for over 2 billion people who lack access to reliable energy. 
 
## What are some unique challenges facing solar financing in Sub-Saharan Africa and what makes a blended debt fund particularly useful? 
 
The solar financing sector faces challenges felt by other investments in emerging economies, including foreign currency and country/political risks. In themselves these common external factors can make it difficult to secure new investors and increase investments. More specifically, in the clean energy and solar space, other challenges include how new some of these business models are, how hard it is to distribute products in remote areas, or for larger projects the lack of infrastructure more generally. On top of this, the solar sector among others increasingly face the implications of climate change events, such as hurricanes, floods and droughts, which create challenges for solar companies, their customers, and the communities they serve. 

Blended debt funds are an ideal approach to advancing financing in this sector for two reasons:

__1. It attracts diverse investors:__ Sustainable energy in emerging markets reaches diverse impact areas (e.g., from energy poverty, climate change, health, education, to food security). The projects that we finance have impacted all those different areas, attracting various investors–particularly impact investors–from donors and foundations, to private impact investors who are commercially oriented and development finance institutions (DFIs).
__2. It allows for scalable financing:__ By taking a junior position and offering first-loss protection, public and philanthropic funders can de-risk transactions for commercially mandated investors, effectively mobilizing greater volumes of capital into solar financing. 

 

## How has COVID-19 impacted the sector, and how has SunFunder navigated these uncertain times?
 

Across the solar companies we support, the impact has varied based on the maturity of each business. Every company has been significantly impacted. What we have observed is that larger, more established and better capitalized players have on average performed better than we expected and managed to continue operations where possible. The smaller, early-stage companies have really struggled, either because they lack a cash buffer or wide investor base, or because they are not diversified across multiple geographies to cushion the blow from regional economic shocks. For the sector to scale long-term, it is important that earlier-stage, locally owned solar companies emerge and advance. These are the companies most at risk of survival due to COVID-19. 

SunFunder has remained as active as ever in the sector throughout the pandemic. We had several sizable loans scheduled to close in late March through June 2020, and we continued to proceed using our risk tools from a couple of public institution partners to mitigate risk and navigate the uncertainty COVID-19 presents; one is a guarantee, the other is political risk insurance. With support from these risk tools, Q1 and Q2 have been our biggest and most successful in the company’s history. 
 

## Why are there so few debt providers in solar financing targeting developing countries, and what is needed to reach more solar borrowers and mobilize greater volumes of private capital? 
 

When it comes to local banks, a lot of them are not familiar with solar finance and the structures required to finance these types of projects. On top of that, they often have very challenging collateral requirements and move at an unfavorable pace. Donors are interested in the space but are not often a sustainable source of financing over time because they tend to gravitate towards what is new rather than what is proven. DFIs have been a crucial lender in the space, but sometimes have ticket sizes that exclude smaller players who need the greatest support. DFIs can also be relatively risk-averse which leaves out many solar companies from raising directly from them. Large international commercial investors, including those with newly established impact funds, find it difficult to invest in solar in Sub-Saharan Africa for a host of reasons, some including: (i) they lack local teams and experience in those markets, (ii) ticket sizes are too small, and (iii) the risk-return profile is weak in their assessment. 

Therefore, intermediaries play a vital role in the space. SunFunder was one of the first, but we are not the only one. We are thrilled to see financial intermediaries emerge in the solar financing space that bring with them experience in the microfinance sector and have developed strong co-lending relationships with some of them including Convergence member, responsAbility, and Oikocredit and Global Partnerships. Together, we are scaling finance in the space. We are aggregating smaller loans with various risk mitigating tools and approaches like first-loss capital and guarantees to present private investors with transactions that meet their scale requirements for their ticket size and return, while offering them local expertise they lack in-house. 
 

## It is not always easy to attribute impact to blended finance. How does SunFunder make this connection? 
 

At SunFunder, we focus on the two major areas: energy poverty and climate change. We measure the number of people that have improved access to energy through the loans that we make and the number of tonnes of greenhouse gas (CO2) emissions avoided because of our loans. We do this on a project-by-project basis and aggregate that data. To date, SunFunder has helped 7 million people gain improved access to solar energy and prevent 700,000+ tons of CO2 emissions from entering the atmosphere annually. Everything we have done has been a result of a blended capital structure. It is clear to us that had we not adopted a blended finance approach, we would not have been able to raise funds or unlock the USD 150 million to advance solar financing. The impact we have had on climate and energy access as an organization through the loans we have made is a result of blended finance. 
 

## Can you provide any insights on how SunFunder integrates gender in its work? 
 

Our thinking about gender equality starts with our team and the way we operate. In addition to that, we look at our pipeline companies and how they work and approach hiring. Often, in emerging economies, women come across white-collar employment opportunities for the first time through solar companies like the ones we lend to. We know solar companies are playing a critical role to empower women in developing countries. The broader impact of improved energy access and solar systems also disproportionately benefit women when we see change at the household level (e.g., replacing kerosine-based systems with solar systems, helping reduce indoor air pollution and better safety). There are some interesting studies that get into some of these benefits, including this report from [60decibels](https://60decibels.com/energy-report "60decibles | Energy Report") and these case studies from our borrower [PEG Africa](https://www.ace-taf.org/wp-content/uploads/2020/04/GESI-Handbook-2020041001.pdf "PEG Africa | Gender and Social Inclusion in Off-grid Solar: A handbook for Sub-Saharan Africa"). 

The truth is the data is more challenging, and this is a gap SunFunder is committed to address. We have begun to ask and answer “*How do we measure gender equality impact of the loans that we have made, and how do we report on that like we do on the number of people who have access to energy?*” We are still early on in this process. 

The U.S. International Development Finance Corporation ([DFC](https://www.convergence.finance/news-and-events/news/3iypwUnCmLfgcuhvc12wxQ/view "Convergence | DFC Member Spotlight")) invested in our most recent fund, the Solar Energy Transformation (SET) Fund, through [the 2X Challenge](https://www.dfc.gov/our-work/2x-womens-initiative "DFC | 2x Women's Initiative"), in an effort to catalyze additional private sector investment to advance women's economic empowerment. We know they, and other key investors in the fund such as Calvert Impact Capital, also a Convergence member, apply a gender lens in everything they do and have a rigorous process for evaluating investments that address gender equality.

 

## SunFunder works with investors including DFIs, impact investors, family offices, foundations, high net worth individuals and institutional investors. What are some trends across these various capital providers in accelerating solar financing and blended finance? 
 

It is hard to generalize since there is distinct activity unique to each group. 

Some investors require seniority with subordinate or “first-loss” capital from others to de-risk their senior investment, and others are more interested in playing a catalytic role and taking a first loss or subordinate position. When DFIs only opt to participate in a senior tranche, that presents a challenge for us and others using similar structures who are interested in scaling because there are very few scalable options available for the subordinate tranches. One trend we are seeing across DFIs is greater willingness to come in as a junior lender and truly play that catalytic role to mobilize additional private capital. This is an important trend that has helped us overcome a heavy roadblock in raising blended capital funds. We saw this with our most recent fund, the SET Fund, which is SunFunder’s third debt fund – a 9-year blended finance vehicle for distributed solar and storage investments in Africa and Asia. Through the SET Fund, we saw both private capital investors and DFIs take on junior debt exposure. Both DFC and Swedfund (Sweden’s DFI) invested in both the senior and junior tranches of the fund, which marked a huge step forward from our vantage point. Had they not done so our fund would have not been viable. 

One of the challenges we face in general is matching investors’ risk-return requirements. Donors and governments being willing to take concessional interest rates and/or a subordinate position has helped us provide commercially viable returns to commercial investors. The SET Fund currently has USD 10 million of senior debt available to reach its USD 70 million target size. We can now offer a high single-digit fixed returns to commercial investors in the fund’s senior tranche. 

Foundations are a mixed bag. Foundations can take more risk, and often are willing to take on subordinate capital exposure. However, one challenge is that once some foundations do something once, often their investment policy limits them being a repeat investor in the same sector or structure as they often prefer innovation over scaling. But when it comes to financing solar, it takes a lot of innovation early on to figure out the right business models and financing structures, and once that is figured out, the aim is to scale by replicating what is proven. This has made it hard to work with foundations in our SET fundraising, with notable exceptions; IKEA Foundation has been a great scalable partner for us. 
 

## What else would you like to share about SunFunder, its activities to date, and what is ahead to increase solar financing?
 

Our mission is to pioneer and scale financing for solar energy and storage in emerging markets and underserved communities around the world. Looking ahead, we aim to design scalable funds that really touch on those two specific aspects of our mission – pioneer and scale. Because they can conflict with one another when it comes to risk-return profile, SunFunder is creating distinct funds that speak to both imperatives, respectively. On the scale side, we are working to develop a large fund that will grow into hundreds of millions, and then billions, to address energy access and the climate crisis. At the same time, we are working with the donor community to design a catalytic pioneer fund to support early-stage locally owned and led businesses to cultivate long-term investible pipeline for the sector. 

*__Are you interested in becoming a member of Convergence's global network for blended finance? [Tell us you're interested.](https://www.convergence.finance/sign-up "Convergence | Member Sign-up") __*

Convergence recently spoke with Florian Meister, Managing Director at Finance in Motion to learn about the company's considerable growth in the field, and what advice they have for other asset managers interested in engaging in developing markets.

Member Spotlight with Florian Meister from Finance in Motion

Member Spotlight with Ryan Levinson from SunFunder

In 2019, Convergence awarded a design funding grant to the Global Development Incubator (GDI) to establish a financing facility that uses targeted incentives to increase lending from local financial institutions and international lenders to agricultural SMEs.

Today, we are thrilled to see Aceli Africa launch as a new market incentive facility designed to mobilize USD 700 million in lending to agricultural SMEs by 2025, by aligning capital supply and demand.

[Visit Aceli Africa](https://aceliafrica.org/ "Aceli Africa") to learn more. 

With initial design funding from Convergence, Aceli Africa launches as a new market incentive facility to mobilize lending to agricultural SMEs.