Project finance is the funding model commonly applied to the long-term construction and development of natural resource and physical infrastructure assets, with equity and debt funding being provided by multiple investors and this financing being repaid from the cashflows of the operating assets.
Project finance in the developing world is beset by numerous risks (e.g., political and regulatory risks, operating risks, etc.). Blended finance can help address some of these challenges. Concessional financing in the form of below-market guarantees or concessional debt or equity, for example, can improve projects’ credit ratings by mitigating risk, enabling them to access private financing on better terms, while technical assistance can produce better-prepared projects at the pre-investment stage, integrating ESG considerations early on. This brief analyzes the 153 blended project transactions recorded by the Convergence database (representing total committed financing of USD 73.3 billion) and presents insights from interviews with key stakeholders.
