Blended finance has been identified as a promising strategy to address global issues. It has particularly captured the attention of the impact investing community as a tool that can mobilize private sector capital, at scale, towards impact. However, despite its potential, blended finance remains underutilized. Key challenges include difficulty in structuring blended finance vehicles due to their complex and bespoke nature; issues with aligning expectations among various stakeholders; and lack of available risk capital. “Blended Finance” is still a term with varying definitions. For the purposes of this Working Group, the GIIN will frame blended finance as a strategy that combines capital with different levels of risk in order to catalyze risk adjusted, market-rate-seeking capital into impact investments.
The Blended Finance Working Group identified a number of challenges that arise in structuring blended finance investments. Since these investments often involve a variety of stakeholders, the Working Group found that difficulties frequently occurred during negotiations over the design and specific terms of the investment vehicle. Specific issues included opposing expectations between risk capital providers and market-rate providers, as well as a lack of common language among the stakeholder group. At best, these issues led to a lengthy negotiation process; at worst, they caused deals to fall apart. To address these challenges, the Working Group has created a suite of resource documents for stakeholders who have decided to utilize a blended finance structure that leverages one of five catalytic tools.
Download the Blended Finance Resource here.
Key Objectives and Activities of the Working Group
The Blended Finance Working Group will mobilize its members through quarterly meetings and concrete goals to meet the following objectives: 1) to address the bespoke nature of designing blended finance structures and 2) to leverage lessons learned in designing and deploying existing blended finance vehicles with the ultimate aim to decrease costs and increase frequency and scale of blended finance investments. The Working Group will explore pursuing the following activities:
- Develop and pilot guidance documents that will assist investors and investees in their decision-making process when considering engagement in a blended finance structure;
- Workshop new blended finance structures among fellow members representing the full array of stakeholders involved in blended finance;
- Engage with investors and managers of structures that have been in the market for 3+ years and hear lessons learned over the lifecycle of these investment vehicles;
- Exchange ideas with existing, third-party initiatives complementing the Working Group’s activities.
This working group is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the Global Impact Investing Network and do not necessarily reflect the views of USAID or the United States Government.
For more information on the GIIN Blended Finance Working Group, please contact the Membership Team at email@example.com.