Toronto, 25 October 2023 – Today, Convergence, the global network for blended finance, releases the 7th edition of the State of Blended Finance report. Drawing from the largest and most detailed database on historical blended finance transactions, the report presents new data and analyses on the global market for blended finance for both climate mitigation and adaptation, including insights on deal and investor trends. Convergence reports:
- Total blended deal volume decreased by approximately 45% in 2022 and about 55% in climate blended finance, reaching a ten-year low in total financing.
- Climate blended finance transactions accounted for under 40% of all blended finance deals in 2022, representing a 10% decline compared to each of the previous five years where climate-focused transactions accounted for 50% or more of the annual deal count.
- Climate blended financing flows from the private sector are declining — from $7.13 billion between 2017-2019 to $5.87 billion between 2020-2022.
These trends are symptomatic of larger macroeconomic challenges impacting financing flows to emerging and developing economies, characterized by inflationary pressures, mounting debt burdens, and geopolitical instabilities.
Since its inaugural issue in 2017, the State of Blended Finance has become an authoritative point of reference on the global blended finance market.
With world leaders due to convene in Dubai for COP28, climate finance stands at a critical juncture. Public financing for climate, while increasing, has seen the overall growth rate decline, private climate financing volumes lag, and climate blended finance flows regress.
“With climate vulnerabilities intensifying worldwide, the time for talk is over,” says Joan Larrea, Convergence CEO. “Concrete action is urgently needed, and blended finance must be utilized more ambitiously to mobilize private investment at scale into climate solutions tailored to the unique realities of developing countries.”
Ms. Larrea adds that “beginning Spring 2024, we will publish two State of Blended Finance reports per year. The cycle will begin with a report published in spring encompassing the entire blended finance market, with a second climate-focused edition released in the fall.”
Remarking on recommendations made in the report, Convergence Director of Knowledge and Thought Leadership, Nnamdi Igbokwe, Ph.D. says, “to scale climate finance, mobilizing private investment must be prioritized as an explicit goal of development finance and must be championed by the MDBs and DFIs within their operating models.”
“The report highlights country-level opportunities for blended finance, spotlighting regions with potential for positive developments and identifying areas where blended finance can immediately and materially contribute to scale private financing and achieve climate outcomes more effectively and efficiently,” Dr. Igbokwe continues.
In addition to analyses of data trends, the report illustrates the present blended finance landscape with expert commentary from Climate Policy Initiative, International Monetary Fund, International Energy Agency, and many more.
Analysis in the report draws from Convergence’s Historical Deals Database, comprised of more than 1000 blended finance transactions (485 climate-focused) with an aggregate value totalling $198 billion across all transactions ($109 billion climate-focused).
Key insights & recommendations
To increase climate blended transactions and mobilize private sector capital for climate projects in emerging markets and developing economies:
- MDBs and DFIs should integrate climate and private sector mobilization KPIs into their operating models and prioritize data and analytics.
- Navigating non-financial risks and political dependencies will be crucial to optimize the potential of blended finance.
- Philanthropic capital must be incorporated and integrated in blended finance as a viable source of catalytic funds.
- Lower- and middle-income countries must be empowered to lead bottom-up approaches to country-level financing platforms.
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. Our global membership includes public, private, and philanthropic investors as well as sponsors of transactions and funds.
We offer this community a curated, online platform to connect with each other on blended finance transactions in progress, as well as exclusive access to tailored trainings and original knowledge products such as case studies and reports. To accelerate advances in the field, Convergence also provides grants for the design of blended finance solutions that could attract private capital to global development at scale.
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