Blended finance

Blend finance is defined as "the strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets", resulting in positive results for both investors and communities. Blended finance offers the possibility to scale up commercial financing for developing countries and to channel such financing toward investments with development impact. As such, blended finance is designed to support progress towards the Sustainable Development Goals (SDGs) set forth by the United Nations. Meeting the SDGs will require an additional $2.5 trillion in private and public financing per year as of 2017 estimates, and an additional $13.5 trillion to implement the COP21 Paris climate accord. Since the Third International Conference on Financing for Development in July 2015, it has been increasingly recognized as a solution to the development 'funding gap', by raising private financing. In 2018, blended finance principles were adopted by the OECD's Development Assistance Committee to guide the design and implementation of the concept. Blended finance is also often invoked to raise climate finance for the global South.

Blended finance is also subject to critique. Scholars and NGOs have widely documented and criticized the growing reliance on private finance to support climate and development goals in the Global South. Critics argue that these financial arrangements often shift profits to private actors - mostly in the Global North - while placing financial risks on Southern governments. This can result in higher costs for public services, reduced government spending flexibility, and increased burdens on marginalized populations. Some view this trend as reinforcing extractive and post-colonial power dynamics. The complexity of these financial structures can undermine transparency and accountability, as commercial confidentiality limits public oversight. Lastly, faced by lackluster growth in blended finance products, both scholarship and development actors have noted decreasing interest of private finance to participate in such schemes, both because of their complexity, risk aversion, and a changing geopolitical climate in the 2020's.