What We Do
The GEF has considerable experience in blended finance, particularly around renewable energy and energy efficiency. Through GEF funding, governments put enabling environments in place such as feed-in-tariffs and power purchase agreements. With this foundation, and the significant cost savings of sustainable energy technologies, the private sector scaled-up its investment. This was especially true for small-scale clean energy projects. Read more+
More recently, the GEF has supported blended finance to harness investment that achieves multiple objectives, including climate change mitigation. Land restoration projects, for example, can deliver both improved soil health and enhance carbon sequestration; agroforestry projects can help protect biodiversity and enhance global carbon sinks. The GEF now has several innovative projects with this focus.
Blended finance is not a panacea, but it is an important tool. And it must evolve and innovate. The GEF continues to help countries and private sector partners match the right types of financial instruments to specific objectives, especially those connecting natural resource management and climate.
GEF experience shows that blended finance is a potent instrument. With the risk assurances provided by blended finance, the private sector invested in projects at a much higher rate than “regular” projects. During 2013-2014, the GEF provided US$1.4 billion in climate finance through “regular” channels. This finance mobilized about US$800 million from the private sector, or about 60 cents for each dollar from the GEF.
Investments in blended finance were on a smaller scale, but packed a bigger punch. In the same year, US$175 million from the GEF for blended finance operations mobilized about US$1.1 billion from the private sector. This leverage ratio of 6.3 was several times higher than from our “regular” operations. Read more+
The GEF in action: Sustainable land management and climate in Africa - The Moringa Agro-forestry Fund for Africa, managed by the African Development Bank, is investing in five to six scalable, replicable projects that combine plantation forestry and agriculture to capture most of the value chain. The GEF has taken a junior equity position in the fund with an expected return of 6 percent. Our position helps lower risks for private sector investors concerned about long payback periods, lack of a track record and uncertainty over product prices. The project also targets 79,000 ha to maintain significant biodiversity and associated ecosystems goods and services, and more than 200,000 ha of production systems under sustainable land and forest management. The project is expected to yield GHG emissions benefits of 9.5 million tonnes CO2e.
To catalyze private sector investment in climate change projects
Additional resources mobilized from the private sector
Leverage ratio achieved through blended finance