New York, 24 September 2019 - Convergence, the global network for blended finance, launched the State of Blended Finance 2019 today on the sidelines of UNGA week. This is the third edition of Convergence’s keystone report, which outlines blended finance trends and key developments over the last year.
The 2019 report found that while there has been steady growth in the application of blended finance, it is not reaching its full potential for achieving development impact and mobilizing additional financing towards the United Nations Sustainable Development Goals (SDGs).
Convergence currently estimates that upwards of $140 billion in aggregate financing has been mobilized by blended finance to date, with at least 50 transactions launched annually across a diverse set of regions and sectors.
However, the approximate $15 billion in annual blended finance recorded by Convergence is only a small fraction of more traditional development finance from multilateral development banks, development finance institutions, and development agencies. The status quo is not enough to fill the $2.5 trillion annual SDG funding gap, with the promise of “billions to trillions” looking more like “billions to billions”. The report concludes that blended finance is at a critical juncture where practitioners need to focus on scaling up and refining blended finance solutions that have demonstrated the ability to achieve measurable impact.
“In 2019 we’re seeing more organizations than ever before execute blended finance deals at higher levels of sophistication,” says Joan Larrea, CEO at Convergence. “This report provides us with a useful benchmark, and we believe that, given the high levels of interest and lag time in structuring and closing these transactions, the next report will tell a very different story.”
Notably, we do see blended finance scaling in new regions. While blended finance has largely been deployed in Sub-Saharan Africa to date, Asia has established itself as the new frontier for blended finance. The proportion of blended finance transactions targeting Asia – both East Asia and the Pacific and South Asia – has increased from 27% in 2010-2012 to 31% in 2016-2018. While Sub-Saharan Africa, though still the region most frequently targeted by blended finance transactions, has declined from 44% of transactions in 2010-2012 to 37% in 2016-2018.
“The Asian Development Bank (ADB) is excited to be doing more with blended finance; it allows us to push in to more frontier emerging markets and enables highly impactful transactions that have strong potential for replication and scale up,” says Michael Barrow, Director General, Private Sector Operations Department, ADB.
Blended finance is more consistently mobilizing commercially oriented private sector investors, especially corporates (i.e. multinational companies) and financial institutions (i.e. commercial and investment banks). Commercial investors accounted for 27% of the financial commitments made to blended finance transactions established in 2016-2018, compared to only 19% in 2010-2012. Impact investors on the other hand accounted for just 8% of all financial commitments made to blended finance transactions in 2016-2018, compared to 18% in 2010-2012.
“This year’s report makes it clear that we have a long way to go to bridge the capital gap needed to address the SDGs through the creation of more investable solutions at scale. It also shows that while blended finance transactions are increasing in number, we need to increase both the size and breadth of blended finance opportunities for investors. We are optimistic and are working closely with partners across the development finance and private markets sectors to build and create solutions that have a meaningful social or environmental impact on society,” says Marisa Drew, Chief Executive Officer of the Impact Advisory and Finance department at Credit Suisse.
Convergence maintains the largest and most detailed database on historical blended finance transactions, which is continuously updated. This report looks at more than 3,700 financial commitments to approximately 500 blended finance transactions. Convergence also consulted its broad network and global membership of over 200 institutions to identify key blended finance trends. Credit Suisse and ADB were among the key stakeholders consulted for feedback on the report.
Convergence continues to build out this database to draw better insights about the market and disseminates this information to the development and finance communities to improve the efficiency and effectiveness of blended finance to achieve the SDGs. For the most up to date data on blended finance activity, you can find key trends and organizations on our blended finance 101 page (full database only available to members).
Convergence is the global network for blended finance. We generate blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes public, private, and philanthropic investors as well as sponsors of transactions and funds. Convergence offers its members a curated, online platform to connect with each other on blended finance transactions in progress, as well as exclusive access to original market intelligence and knowledge products such as case studies, reports, training, and webinars. To accelerate advances in the field, Convergence also provides grants through its Design Funding program, for the design of vehicles that could attract private capital at scale. Convergence is funded by the Government of Canada and the John D. and Catherine T. MacArthur Foundation.
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