Press release: State of Blended Finance report 2018 reveals growth of blended finance market
Convergence, the global network for blended finance, launched the State of Blended Finance 2018 today on the sidelines of UNGA week.
This is the second edition of Convergence’s keystone report following the inaugural report published in 2017. The 2018 report outlines current blended finance trends and key developments over the last year, including updated data on top investors in the space, alignment with Sustainable Development Goals (SDGs), key sectors and regions, and blending approaches.
One finding is that the use of blended finance is growing. Based on Convergence’s data, $100 billion has been mobilized by blended finance to date, almost double our estimate from last year. The number of blended finance deals has been steadily increasing since 2005, with 69% of all deals captured in Convergence’s database launched between 2010-2018.
“In two years since Convergence has launched, we have seen blended finance enter the mainstream, leaving a mark on not just major meetings and conferences around the world but in international development policy and strategies,” says Joan Larrea, CEO at Convergence. “This report breaks through the noise to give practitioners a clear sense of the current trends and best practices, so they can steer the right blend of capital into transactions that address the SDGs.”
The Report also concluded that blended finance is a powerful tool for financing the SDGs in Sub-Saharan Africa, with 42% of deals targeting this region. However, the vast majority of this capital flows to East Africa, which produced the continent’s best economic performance in 2017. This reflects the broad trend that blended finance transactions are more likely to target middle-income countries than low-income countries.
Finally, blended finance is not a panacea for financing the SDGs, but it can help mobilize additional sources of capital for certain sectors and projects. While blended finance has the strongest alignment with four goals: Goal 17 (Partnerships), Goal 1 (No Poverty), Goal 9 (Industry, Innovation, and Infrastructure), and Goal 8 (Decent Work and Economic Growth), there is growing momentum around deploying blended finance approaches for clean energy (Goal 7), climate finance (Goal 13), water and sanitation (Goal 6), and gender equity (Goal 5).
Convergence maintains the largest and most detailed database on historical blended finance transactions, which is continuously updated. As of August 2018, the database captured over 2,500 financial commitments to over 300 blended finance transactions. Convergence also consulted its broad network and global membership of nearly 300 institutions to identify key blended finance trends. The Organization for Economic Co-operation and Development (OECD) and The Rockefeller Foundation were also among the key stakeholders consulted for feedback on the Report.
“The Report provides an essential mapping of blended finance trends and activities. It is particularly useful to see the emphasis on establishing benchmarks around impact, additionality, and mobilization,” says Paul Horrocks, Unit Head of Private Finance for Sustainable Development, OECD.
“The Report provides a critical benchmark for the field, offering development practitioners insight into both gaps and areas of growing momentum in leveraging blended finance—particularly relative to mobilizing dollars to tackle the Sustainable Development Goals.” says Adam Connaker, Senior Program Associate, Innovative Finance and Impact Investing at The Rockefeller Foundation.
Blended finance is at a critical juncture. Blended finance practitioners are coordinating to improve the use of blended finance, including scaling existing approaches and solutions. Nonetheless, these transactions represent a drop in the bucket compared to global financial markets. The Report concludes that a vision for blended finance is needed to identify a common blended finance agenda, promote scalable solutions, and increase knowledge and data sharing and transparency. Convergence intends to convene a group of practitioners to create this vision in the coming months.
Photo courtesy of Sudipto Sarkar.