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Making Blended Finance Work for the Sustainable Development Goals

image of Making Blended Finance Work for the Sustainable Development Goals

The global community has spoken loud and clear: more resources must be mobilised to end extreme poverty and mitigate the effects of climate change. Blended finance - an approach to mix different forms of capital in support of development - is emerging as an important solution to help raise resources for the Sustainable Development Goals in developing countries. But scaling up blended finance without a good understanding of its risks could have unintended consequences for development co-operation providers. This report presents a comprehensive assessment of the state and priorities for blended finance as it is being used to support sustainable development in developing countries.  It describes concepts and definitions, presents an overview of actors and instruments, and discusses lessons learned from blending approaches, tracking and data, and monitoring and evaluation. Its findings and recommendations are useful for policy makers and practitioners.

 

'Blended finance will contribute to faster economic growth, but to achieve this it is vital to get donors into alignment.'

Martin Wolf, Chief Economics Commentator, Financial Times

'Official development assistance continues to be a key way to finance efforts aimed at eradicating extreme poverty. However, the challenge is more than governments alone can manage. We must all think, work, finance and deliver development differently to mobilize private-sector resources and expertise to help the world’s poorest and most vulnerable people. Canada continues to promote innovative approaches to finance development and achieve sustainable growth for everyone.'

The Honourable Marie-Claude Bibeau, Canada's Minister of International Development and La Francophonie.

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Methodology for surveys on blended finance funds and facilities

Two categories were identified for the purpose of this research: funds and facilities (see Table A2.1 for characteristics of each). An initial mapping was conducted to identify funds and facilities launched between 2000 and 2016, building on surveys by the Association of European Development Finance Institutions (EDFI) and World Economic Forum conducted in 2015, and on OECD surveys of amounts mobilised from the private sector by official development finance interventions (see Chapter 5). The mapping identified 356 blended finance vehicles that were set up in this time period, 167 of them facilities and 189 funds. Facilities are earmarked pools of development resources for blended finance; in contrast, funds always include commercial capital. Within the funds, a distinction was made between structured funds and flat funds. Structured funds allow actors with different risk/return profiles to invest in different tranches. In flat funds, all shareholders hold the same return and bear the same risk as the other.

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