Main Issue

Creating a low-carbon world will cost trillions of dollars a year — more than governments alone can provide. They must invest scarce public resources in a way that catalyzes the private sector to contribute the balance. Many leaders in the private sector want to play a larger role in “green” finance as part of a growing commitment, reducing risks to supply chains, preserving access to natural resources and sharing responsibility for the global commons. The financial challenges, however, can be daunting. To bridge this gap, GEF and its partners are increasingly promoting the use of blended finance.  Blended finance combines the power of development finance and private capital to reduce risks and increase opportunities for private investors. It also helps rally partners from different sectors around an issue. Our experience has shown it gives private investors an extra incentive to take action on climate change. Read more+ The most common type of instruments in blended finance are: Guarantees, which provide protection from various forms of risks of capital loss for investors;  Debt, typically in the form of subordinated or concessional debt (or both);  Equity, typically in the form of junior equity accepting higher risks for lower financial returns. Apart from acting as a financing catalyst, blended finance can also strengthen partnerships and knowledge sharing. It rallies a broad coalition of stakeholders around a particular issue, creating new synergies. Partners can range from multilateral development agencies to private commercial investors, impact investors, civil society and others.

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+

Results

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+

$175 million


To catalyze private sector investment in climate change projects 

$1.1 billion


Additional resources mobilized from the private sector

6.3


Leverage ratio achieved through blended finance