nairobitraining banner

__Friday, February 28, 2025, 9:00AM - 5:00PM EAT, Nairobi, Kenya__

---

Join Nairobi's public, private, and philanthropic actors for an in-person interactive and practice-driven training on blended finance. This intermediate-level session will combine insights from Convergence experts and blended finance practitioners in the field. This training is an opportunity for Convergence members and partners to gather to share insights and experiences and tackle difficult questions around innovative approaches to mobilize private capital for the Sustainable Development Goals.

Speaker details and agenda to follow.

This training is complimentary for members (one seat for Standard Membership, two seats for Market Builder Membership), USD 150 for additional member seats, and USD 250 for non-members. Please contact your relationship manager for more details or questions about your membership type.

*Registration is on a first come, first served basis and capacity is limited. We encourage registering early to reserve your seat.*

In-Person Convergence Blended Finance Training in Nairobi

Join us in Nairobi, Kenya for a full-day training combining insights from Convergence experts and blended finance practitioners in the field.

Blended Finance Training in London U.K.

AGES---DS-SALES-BANNERS-1200x675

__February 19-21, 2025, Cape Town, South Africa__

---
Don’t miss [Africa's Green Economy Summit](https://wearevuka.com/green-economy/ages/) in Cape Town from February 19-21, 2025, where global capital meets African opportunities. This investor-focused event will spotlight key themes including green reforms, nature and biodiversity, climate finance, resilient cities, and green industrialization. 

Convergence is a supporting partner of the Summit.

Africa's Green Economy Summit

Don’t miss Africa's Green Economy Summit in Cape Town!

londontraining banner

__Monday, February 3, 2025, 9:30AM - 4:30PM GMT, London U.K.__

---

As an intermediate-level programme, this full-day training will combine blended finance and mobilization data, case studies, insights from Convergence experts, notable speakers from major organizations, and technical experts in the field. Convergence members will participate in an inspiring, interactive, and practice-driven day of learning and knowledge sharing around blended finance as an approach to mobilize more private capital for the United Nations Sustainable Development Goals and Paris Agreement.

This training is complimentary for members (one seat for Standard Membership, two seats for Market Builder Membership), USD 500 for additional member seats, and USD 750 for non-members. Please contact your relationship manager for more details or questions on your membership type.

Register by __January 7th__ to reserve your seat.

In-Person Convergence Training for Blended Finance Practitioners in Europe

Join us in London U.K. for a full-day training combining blended finance and mobilization data, information and cases, insights from Convergence experts, notable speakers from major organizations, and technical experts in the field.

pimmsweb social

__Info Session: Scale Private Investment Mobilization Standardization Project, Wednesday, January 15, 2025, 10:00AM ET__

---

Convergence invites you to an Information Session and Member Consultation on the Scale Private Investment Mobilization Standardization Project.

The main objective of the project is to identify, in consultation with Developing Countries, Developed Countries, MDBs & DFIs, philanthropic foundations and private sector investor groups, proven blended finance models that will lead to private investment mobilization at scale to Low and Middle-Income Countries to fund the SDGs. Once identified, the goal is to standardize and replicate these models and demonstrate how concessional funding can be awarded optimally to the best cases aligned to the models.

The 60-minute session will include a presentation on the project, gathering initial feedback from members. Your participation will help shape this transformative effort to mobilize private investment at scale.

Register now to join us.

Info Session: Scale Private Investment Mobilization Standardization Project

Join Convergence for an Information Session and Consultation on the Scale Private Investment Mobilization Standardization Project

Private Investment Mobilization Standardization Project

Member Training: How Foundations Blend

__Member Training: How Foundations Blend, January 9, 2025, 10:00AM ET__

---

Following the release of Convergence's [Blending with Foundations Data Brief](https://www.convergence.finance/resource/blending-with-foundations/view), this member training will present on the major findings of our research and invite speakers from international foundations who are actively involved in blended finance.

The session will cover:
- How foundations engage in blended finance on both a concessional and commercial basis.
- What barriers and opportunities exist for foundations looking for catalytic investments using blended finance.
- How foundations are uniquely placed to support transactions across social sectors and current initiatives looking to increase capital flows from these capital providers.

Join us as we explore how foundations blend

How Philanthropic Organizations Blend

Convergence Member Networking in Mumbai: Scaling Blended Finance in India

__Thursday, December 12, 2024 at 4:00pm – 6:30pm IST__

---
Convergence invites you to a networking event with members and partners in Mumbai, India. The event will feature:

- Keynote presentation of key findings from our [State of Blended Finance 2024: Climate Edition ](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view)with Asia and India lens
- Discussions on potential to scale blended finance in India
- Networking Drinks 
 

Jointly organised by Convergence and KOIS, this event will bring together Convergence's members, partners, and other innovative finance stakeholders comprising impact investors, institutional investors, donor agencies, development banks, and sponsors of blended finance deals. It will be an opportunity to connect with like-minded individuals engaged in blended finance, make new contacts, exchange ideas, and more.

Due to limited capacity, this is an invite-only event. If you are interested in attending, please reach out to: asia@convergence.finance

Convergence invites you to a networking event with members and partners in Mumbai. 

Member Networking Mumbai: Scaling Blended Finance in India

itf CI2 panelgraphic

__Inside the Deal: Climate Investor 2, December 4, 2024, 9:00AM - 10:00AM ET__

---

Explore the inner workings of real blended finance transactions through Convergence's "Inside the Deal" webinar series. Each quarter, we delve into a successful deal, inviting the deal sponsor and key stakeholders to offer candid insights on structuring these intricate transactions.

In our next webinar, we will feature Climate Fund Managers' Climate Investor 2 (CI2). CI2 is a blended finance facility delivering water, sanitation, and oceans infrastructure projects in emerging markets.

During this hour-long webinar, the Climate Fund Managers team will provide an overview of the facility’s structure and their fundraising journey. We will also conduct in-depth interviews with key stakeholders involved in the transaction, uncovering invaluable lessons learned along the way. The webinar will conclude with an open Q&A session.

*This webinar is open to Convergence members only.*

Inside the Deal: Climate Investor 2

Explore the inner workings of real blended finance transactions through Convergence's "Inside the Deal" webinar series. Each quarter, we delve into a successful deal, inviting the deal sponsor and key stakeholders to offer candid insights on structuring these intricate transactions.

In this webinar, we featured Climate Fund Managers' Climate Investor 2 (CI2). CI2 is a blended finance facility delivering water, sanitation, and oceans infrastructure projects in emerging markets.

During the hour-long webinar, the Climate Fund Managers team provided an overview of the facility’s structure and their fundraising journey. We also conducted in-depth interviews with key stakeholders involved in the transaction, uncovering invaluable lessons learned along the way. The webinar concluded with an open Q&A session.

Join us to learn about Climate Fund Manager’s Climate Investor 2 (CI2).

AGES-Convergence-WEBINAR-1200X628-1

__Wednesday, November 27, 2024, 4:00PM-5:00PM EAT__

---

Blended finance has emerged as a key tool for mobilizing private capital to address development and climate challenges, especially in Sub-Saharan Africa. As climate risks intensify, the need for sustainable investment in sectors like energy, agriculture, and financial services becomes more critical.

Convergence’s recently published [State of Blended Finance 2024: Climate Edition](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view) provides fresh insights into the state of blended finance globally, with a special focus on climate-related investments. The report highlights that Sub-Saharan Africa accounts for 41% of climate-blended finance transactions, driven by the continent's investment opportunities and urgent climate needs. Despite significant progress, barriers such as perceived risks and relatively small transaction sizes continue to hinder private sector participation in the region.

Join us, alongside Africa's Green Economy Summit, for this webinar as we present key findings from the report, discuss the successes and challenges in mobilizing climate finance in Africa, and explore strategies to unlock more private capital with a climate lens.

The State of Blended Finance 2024 (Climate Edition): Spotlight on Africa

Join us, alongside Africa's Green Economy Summit, for this webinar exploring the State of Blended Finance 2024: Climate Edition, with specific focus on Africa.

The State of Blended Finance 2024 (Climate Edition): Africa

Let's talk about Blended Finance: Practical Cases

__Tuesday, November 26, 2024 at 8:00 - 10:00 AM ET__

---
Join Convergence, NAB Colombia, and Brigard Urrutia for an engaging networking event, “Let’s Talk About Blended Finance: Practical Cases,” on November 26, 2024, from 8:00 AM to 10:00 AM in Bogotá, Colombia.

One complimentary seat is available for each Convergence member.

Networking Event – Let’s Talk About Blended Finance: Practical Cases

Let’s Talk About Blended Finance: Practical Cases

blendedbondswebinar banner

__Innovative Finance for Climate: The Role of Blended Bonds, November 25, 2024, 10:00AM - 11:30AM ET__

---

Join us for a webinar on the innovative use of blended bonds to address the climate financing gap. As global climate commitments continue to grow, the need for effective financing solutions has become paramount. This webinar will explore how blended bonds are emerging as a critical tool to mobilize capital for climate adaptation and mitigation projects worldwide.

The session will begin with presentations from leading organizations in the field: Convergence and the Climate Bonds Initiative (CBI). Convergence, a global network for blended finance, will provide an overview of how blended finance climate bond structures are effectively attracting both public and private capital. CBI, a pioneer in the green and sustainable bond space, will present on how certification and standardization of climate bonds are enhancing transparency, lowering risk, and improving market credibility and on the role of policy makers in supporting this process.

Following the presentations, a dynamic panel discussion will delve into the practical aspects of structuring and deploying blended bonds for climate action. Panelists will address the challenges and opportunities in scaling up the use of blended bonds.

The final agenda and panelists will be shared closer to the event date.

Innovative Finance for Climate: The Role of Blended Bonds

Watch this webinar on the innovative use of blended bonds to address the climate financing gap. As global climate commitments continue to grow, the need for effective financing solutions has become paramount. The webinar explored how blended bonds are emerging as a critical tool to mobilize capital for climate adaptation and mitigation projects worldwide.

The session began with presentations from leading organizations in the field: Convergence and the Climate Bonds Initiative (CBI). Convergence, a global network for blended finance, provided an overview of how blended finance climate bond structures are effectively attracting both public and private capital. CBI, a pioneer in the green and sustainable bond space, presented on how certification and standardization of climate bonds are enhancing transparency, lowering risk, and improving market credibility and on the role of policy makers in supporting this process.

Following the presentations, there was a dynamic panel discussion delving into the practical aspects of structuring and deploying blended bonds for climate action. Panelists addressed the challenges and opportunities in scaling up the use of blended bonds.

Join us to learn about the innovative use of blended bonds to address the climate financing gap.

State of Blended Finance Climate Edition – Spotlight on Asian Trends

__Member Training: State of Blended Finance (Climate Edition) – Spotlight on Asian Trends, November 21, 2024, 10:30AM-11:45AM SGT__

---
Convergence just launched [the State of Blended Finance 2024 report](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view) with a focus on climate, which offers an updated analysis on climate blended finance in emerging markets, covering sector, region, and investor trends.

This session will focus on the the Asia-Pacific region, exploring the challenges and opportunities to mobilizing private sector finance into climate projects at scale in Asia.

__Featured Speakers:__
- Tristan Knowles, Unit Head, Blended Finance, Asian Development Bank
- Nandini Chaudhury, Managing Director, Head of APAC Advisory, CrossBoundary
- Eric Arndt, Director, Asia Regional Office, The Rockefeller Foundation
- Ritesh Thakkar, Senior Advisor and Head of Asia Pacific, Convergence Blended Finance (Moderator)

Each Convergence member organization has two complimentary seats in each training. Non-members can register for a fee of USD75.

Member Training: State of Blended Finance (Climate Edition) – Spotlight on Asian Trends

__Member Training: State of Blended Finance (Climate Edition) – Spotlight on Asian Trends, November 21, 2024, 10:30AM-11:45AM SGT__

---
Convergence recently launched [the State of Blended Finance 2024 report](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view) with a focus on climate, which offers an updated analysis on climate blended finance in emerging markets, covering sector, region, and investor trends.

This session focused on the the Asia-Pacific region, exploring the challenges and opportunities to mobilizing private sector finance into climate projects at scale in Asia.

__Featured Speakers:__
- Tristan Knowles, Unit Head, Blended Finance, Asian Development Bank
- Nandini Chaudhury, Managing Director, Head of APAC Advisory, CrossBoundary
- Eric Arndt, Director, Asia Regional Office, The Rockefeller Foundation
- Ritesh Thakkar, Senior Advisor and Head of Asia Pacific, Convergence Blended Finance (Moderator)

Join us as we explore climate blended finance in Asia-Pacific region.

State of Blended Finance Climate Edition – Asian Trends

Member Townhall 2024

__Wednesday, November 20, 2024 at 10:00AM – 11:00AM ET__

---
Convergence is delighted to invite you to its inaugural __Member Townhall 2024__. This Townhall will provide Convergence’s members the opportunity to directly engage with members of its Content and Engagement Teams, and:
- Provide feedback on Convergence’s recently published research.
- Provide suggestions on topics for Convergence to explore in future research reports.
- Discuss other ways in which Convergence’s __Content__ and __Engagement Teams__ can better service your needs or areas of interest as members. 
 
Stay tuned for more details on the full agenda.

Convergence Member Townhall 2024

Join us for our inaugural  Member Townhall 2024.

*Figure 1: Annual deal count and aggregate financing of transactions with foundation investors and all transactions within the HDD, 2014-2023* 

Within the past decade, foundations have played an important role in blended finance. Since 2014, an average of 18% of blended transactions annually recorded in Convergence’s historical deals database (HDD) have included capital from at least one foundation. Given their ability to provide flexible capital, their focus on achieving impact, and their mission to catalyze big solutions to global challenges, foundations have the potential to play a larger role in blended finance. In the HDD, there are examples of how foundations can be grant providers, catalytic concessional investors, and commercial senior investors. This article provides a snapshot of our latest members only data brief on blending with foundations, including opportunities and challenges related to incorporating capital from foundations in blended finance transactions. 

*Click [here](https://www.convergence.finance/resource/blending-with-foundations/view) for the Blending with Foundations data brief (paywall).* 

## Data highlights from the brief: 
 
Overall, Convergence has recorded 236 blended finance transactions that include at least one foundation as an investor, totaling $24.2 billion in aggregate financing. 
 

## Two-thirds of foundation investment commitments are concessional 
 

When looking at all foundation investment commitments to blended finance transactions within the HDD, 66% are provided on concessional terms and 34% on commercial terms. This indicates that foundations are largely using financial tools within the blended finance structure as a means of mobilizing commercial investors. 

Within the pool of concessional capital provided by foundations, grants account for 38% of the financing, while return-seeking investment instruments, including equity, debt, and guarantees account for 62%. Commercial investments, like concessional investments, see higher financing levels for equity (61%). Equity investments may allow foundations to have more influence over the strategic direction of a project or company, ensuring their values and mission align closely with the investment’s outcomes. 

![Percent of concessional financing (left) and commercial financing (right) used by foundations in blended finance transactions by investment instrument ](//images.ctfassets.net/4cgqlwde6qy0/aQnQDRZpmmkgjES4xniki/a367706aca0b5e9396f8d70cd9b6ae0d/Screenshot_2024-12-18_at_9.29.34_AM.png)
*Figure 2: Percent of concessional financing (left) and commercial financing (right) used by foundations in blended finance transactions by investment instrument*

## Funds are more than twice as frequently used in transactions with foundations than without 
 

Funds are the preferred blended vehicle for foundations, accounting for 51% of all foundation-investor blended transactions. Funds are likely a popular vehicle choice because foundations lack the operational or regulatory flexibility to make numerous, smaller direct investments, such as through projects. Foundations may have fewer staff, or lower capacity for administrative overhead, and managing a direct investment into a project can be resource intensive. This is clearly shown within the HDD, as projects account for only 5% of transactions funded in part by foundations, compared to 34% of those that are not. Meanwhile, funds offer a centralized investment vehicle, simplifying monitoring and due diligence. 

![Transactions with foundation funding vs. those without by blended vehicle type ](//images.ctfassets.net/4cgqlwde6qy0/3aaZIfU5gjwvZmJyupro9X/75bbdcf44ad5c66dccdc7a69c79cc78c/Screenshot_2024-12-18_at_9.31.32_AM.png)
*Figure 3: Transactions with foundation funding vs. those without by blended vehicle type*

## Challenges and opportunities for using capital from foundations in blended finance transactions 
 

__To address the challenge of balancing mission and financial returns, increase impact-based investments within endowments__

Foundations must continuously balance their fiduciary responsibilities of ensuring sustainability within their operations and investing in mission-related transactions. In the United States of America (U.S.), regulations governing foundation investments, especially program related investments (PRIs) can make the legalities around return-seeking concessional investments difficult to navigate. While PRIs can enable blended finance, because they allow foundations to invest while focusing on both generating returns and higher levels of impact, there are also opportunities to align more of a foundation’s endowment with other impactful investments, rather than committing financing to commercial investments with no impact. 

__To address the challenge of structural complexity, create standardized models and build confidence in strategic investment methods__ 

For many foundations, blended finance creates a layer of complexity that is difficult to overcome. There are currently no standardized models that are easily replicable and that also show high levels of impact and appropriate returns. The creation and execution of standardized, replicable models can therefore reduce the overall load on small foundation investment teams and minimize transaction costs. It may also encourage using concessional capital through PRIs, which can draw in higher levels of private capital mobilization. Another means of reducing complexity is through becoming familiar with a particular investment strategy. For example, some focus mainly on using guarantees or concessional debt. 

__To address the challenge of smaller investment ticket sizes, focus on high-impact areas__ 

Foundations typically have smaller investment ticket sizes, which can lead to limited additionality within a blended finance transaction. Through focusing investments on high-impact areas with low private mobilization, such as education or healthcare, and seeking out specific challenges, foundations can have an outsized impact. They can also focus on providing early-stage capital and partnering with development finance institutions to tackle larger issues. 

Foundations have already shown their ability to play a catalytic role in blended finance transactions using flexible capital and impact-driven investment strategies. Through grants, catalytic concessional investments, and commercial investments, foundations have contributed to blended finance transactions in a myriad of ways throughout the past decade. While there are barriers that impact foundations’ ability to participate at even higher levels, these challenges also present opportunities. If given the proper tools, foundations can become an even more powerful force for blended finance.

How can foundations act as catalyzers in blended finance transactions? 

How foundations act as catalyzers in blended transactions

__By: Juliette Averseng, Associate Partner at KOIS, Charlotte Badenoch, Principal at KOIS, Clara Marköö, Senior Manager at KOIS__

*Network Voices is a series where Convergence amplifies blended finance opinions and activities from our network.*

In May 2024, the [UNHCR reported](https://hias.org/news/unhcr-number-displaced-worldwide-exceeds-120-million/) for the first time in history, more than 120 million people worldwide were displaced by conflict — a staggering 1.5% of the global population. This record number underscores an era of compounding crises, where protracted conflict, economic instability, and climate change drive millions from their homes, often leaving them in precarious conditions for decades. As these crises persist, the international community confronts a dual imperative: we must meet the urgent humanitarian needs of affected populations, while also creating pathways to long-term resilience and stability.

Traditional humanitarian aid models, while essential for immediate response, lack the scope and flexibility to address long-term needs in protracted crises.  Their focus on short-term relief and rigid funding structures often prevents the transition to sustainable, adaptive solutions that foster stability and self-reliance. The widening funding gap also highlights that public and philanthropic resources alone are insufficient. With the right incentives and standards in place, private investment can act as a crucial partner, not only by achieving scale, but also by driving innovation and delivering lasting impact – strengthening local economies, fostering self-reliance, and paving pathways to long-term stability.

However, fragile contexts pose significant challenges that deter traditional investment. Security threats, political volatility, legal uncertainties, and underdeveloped markets create a high-risk environment. Without effective mechanisms to manage these risks, traditional investors remain cautious, leaving fragile regions deprived of the capital essential to foster stability and resilience.

__The Potential of Blended Finance__

Blended finance realigns incentives by leveraging public and concessional funding to reduce risks and enhance returns for private investors. It also facilitates the creation of new revenue streams and innovative financing structures, enabling businesses in challenging contexts to access capital tailored to their specific needs.  Below, we illustrate three use cases that demonstrate how blended finance can solve some of the challenges that humanitarian and development players face in conflict-affected and fragile settings.

__Use Case #1: Investing in durable infrastructure__

In crisis contexts, emergency responses provide vital relief to affected populations, but as crises endure, what were meant to be temporary fixes often turn into expensive, long-term solutions. Typically operating on tight annual budget cycles, humanitarian organizations have a restricted ability to invest in the upfront capital required for durable infrastructure. They rely on stopgap measures (e.g. the transportation of water in trucks, running pumps on diesel generators) which not only incur high recurring costs and pose environmental challenges, but also jeopardize the continuity of services once the crisis ends and humanitarian organizations depart. 

The [WASH Blended Finance Facility](https://koisinvest.com/post/learnings-from-the-field-financing-climate-friendly-water-infrastructure-in-fragile-contexts/), designed by [KOIS](https://koisinvest.com/) and [UNICEF](https://www.unicef.org/) with support from [Proparco](https://www.proparco.fr/en), the [Conrad N. Hilton Foundation](https://www.hiltonfoundation.org/), and the [Global Financing Facility](https://www.globalfinancingfacility.org/) offers a solution to this problem. In this approach, investors finance a portfolio of long-term infrastructure projects, while donors provide guarantees to de-risk the investment. By enabling access to investment, the private sector takes over the provision of WASH services for NGO and UN off-takers, offering a more sustainable, affordable, and inclusive model owned by and providing jobs for local communities.

__Use case #2: Supporting longer-term development programming__

When transitioning from emergency assistance to long-term redevelopment of communities, efforts are directed towards service provision rebuilding as well as sustainable income generation for affected populations. Results-based financing has proven particularly effective to support longer-term development programming where public service is lacking and commercially viable models do not exist. This approach is also adapted to interventions deemed too risky due to the limited evidence on what works, complex causal relationship between activities and desired outcomes especially in unstable and rapidly evolving settings, as well as the time needed for results to materialize. 

The [Refugee Development Impact Bond (DIB)](https://www.refugeeimpactbond.org/) in Jordan structured by KOIS in collaboration with the [Near East Foundation](https://neareast.org/), the IKEA Foundation, the [Novo Nordisk Foundation](https://novonordiskfonden.dk/en/), [Norad](https://www.norad.no/en/), [Ferd](https://ferd.no/en/baerekraft/humanitarian-initiatives/), and US International Development Corporation ([DFC](https://www.dfc.gov/)) exemplifies an innovative approach to these challenges, with a results-based financing structure that shares risk across partners. The DIB directs funding toward Syrian refugees and members of their host communities to support them in the creation of home-based businesses. The DIB enables flexible resource allocation through multi-year funding provided as upfront financing by investors (e.g., impact investors, development finance institutions (DFIs), commercial investors), which is reimbursed with interest (i.e. 5.1% of maximum annualised rate of return in this case) by outcome payers (e.g. governments, foundations, development aid agencies) based on independently verified outcomes, such as enterprise creation and livelihoods improvement. This approach enables the service provider to adapt programming to changing conditions on the ground while ensuring accountability and maximizing impact. The Refugee DIB was supported by design funding from both Convergence and the IKEA Foundation to come to life. Design funding is a critical tool in the blended finance toolkit which supports innovative and complicated blended finance structures reach feasibility and proof of concept and plays a pivotal role in catalyzing more funding into these challenging settings.

__Use case #3: Supporting local businesses__

Another challenge that blended finance can address is the difficulty private businesses in fragile contexts face in accessing the capital they need to grow and scale. These businesses – particularly small and medium sized enterprises (SMEs) have significant potential to create jobs, enhance local services, innovate and drive long-term change by addressing humanitarian needs. Indeed, in fragile contexts where states are often absent or too weak to provide essential services, the role of the private sector becomes even more critical. The private sector can step in to fill the gaps left by underdeveloped or absent public service delivery, providing essential services such as healthcare, education, and access to clean water. 

However, investors face high real and perceived risks when considering these businesses, including macro risks such as economic volatility and weak regulatory environments, as well as operational risks like inadequate infrastructure, limited management capacity and lack of technical expertise within the businesses themselves. Blended impact investment funds, like the Refugee Investment Facility by [iGravity](https://www.igravity.net/) and the [Danish Refugee Council](https://drc.ngo/) and the [World Food Programme Innovation Bridge Fund](https://innovation.wfp.org/project/wfp-innovation-bridge), aim to address these challenges by using donor funded first-loss capital or guarantees alongside technical assistance. While the former de-risks investments by absorbing a portion of the financial risk, the latter enhances the operational capacity of SMEs, making them more investable. By improving both the financial and operational viability of businesses, blended finance funds can create conditions for investors to engage in markets they would otherwise avoid. 

__The Path Forward: Scaling Proven Models__

Blended finance can unlock significant investment in fragile contexts.  Blended finance has the potential to mobilize public and private capital in the world's most challenging environments. While several pioneering projects highlight the effectiveness of tailored, risk sharing models in driving impactful investments and supporting the emergence of the private sector in fragile contexts, these initiatives are only the beginning of what’s possible.

The critical next step is to transcend isolated success stories and focus on scaling these strategies to ensure they reach the communities most in need, and at a larger scale. Achieving this will require robust collaboration across public, private, and philanthropic sectors, as well as a concerted effort to unlock additional capital and strengthen local ownership to ensure solutions are both sustainable and contextually relevant. 

One such example is the [Refugee Humanitarian Development Peace Outcomes Fund](https://www.linkedin.com/posts/koisofficial_sdg16-stakeholders-refugeehdpoutcomesfund-activity-7265620053016911872-5QIC/) currently being designed by KOIS and Finance for Peace with the financial support of the SDG Impact Finance Initiative. The proposed USD$100 million Outcomes Fund aims to mobilize public and private capital at scale through innovative results-based financing to fund humanitarian, development, and peacebuilding projects as well as market-based organizations in displacement-affected areas in Sub-Saharan Africa. The Outcomes Fund builds on KOIS’s historical work in humanitarian and results-based financing, leveraging a larger scale vehicle to reduce transaction costs, centralize evidence and learnings, and facilitate a coordinated approach that both builds the enabling environment and provides the necessary financing for businesses in fragile contexts to thrive. It will also be used to test sustainable results-based financing models which go beyond grants and leverage more private capital.

Blended finance has the power to transform fragile contexts by unlocking capital, fostering collaboration, and driving sustainable solutions at scale; now, it is time to build on these successes, expanding proven models to reach more communities and creating lasting impact in the face of compounding global crises.


NETWORK VOICES: Blended Finance in Action - Unlocking Investment in Fragile Contexts	

Blended Finance in Action - Investment in Fragile Contexts	

As 2024 comes to a close, we’re excited to share Convergence’s most impactful content of the year – the reports, blogs, and op-eds that you engaged with the most in 2024!

## Top Report: State of Blended Finance 2024 
 

This year, for the first time, we released two State of Blended Finance reports. The first report released in April covered the overall blended finance market and the second, released in October, focused on [climate](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view). The April report provides analysis and insights on the entire blended finance market, including blended finance activity across sectors, regions, investors, investment structures, development impact generation, and more.

This report observed that financing totals bounced back to near pre-pandemic volumes, reaching a 5-year high of $15 billion in 2023. The report also saw a significant uptick in the cadence of blended finance over time, with an increase in the average number of annual blended finance transactions from 2021-2023 compared to the past decade. Additionally, the report explores some of the key regulatory roadblocks faced by large-scale commercial investors active in blended finance and delves into transparency in blended finance. 

[Read the report now.](https://www.convergence.finance/resource/state-of-blended-finance-2024/view)

## Top Data Brief: Blended Finance in Sub-Saharan Africa - SME Financing 
 
This Data Brief explored financing for small- and medium-sized enterprises (SMEs) in Sub-Saharan Africa .

SMEs play an important role in the economic development of the Sub-Saharan Africa region, however they face significant challenges accessing the financing needed to survive and grow. The brief shares insights from interviews conducted with industry stakeholders, exploring challenges for SMEs in Sub-Saharan Africa and opportunities for blended finance to support them. Convergence's Historical Deals Database (HDD) has captured 145 SME-focused transactions in Sub-Saharan Africa, totalling $11 billion. This represents just over 27% of the total number of Sub-Saharan Africa deals in the HDD, but only 14% of aggregate financing. 

[Read the data brief now.](https://bit.ly/4cNTFB9)

## Top Op-ed: Three Africa-led blended finance models mobilizing billions for development 
 
In this op-ed, our Director of Engagement and Capacity Building and Head of AfricaAakif Merchant explores financial innovation in Africa. The piece highlights three first-of-their-kind approaches to blended finance by African development finance institutions and multilateral development banks.
 
 

[Read the op-ed now.](https://www.convergence.finance/news/650ojm9Ikyj9yZM8ILWtvp/view)

## Top blog: Developments on the blended finance ecosystem: Green Guarantee Company 
 
Following the launch of the world's first climate-focused guarantee company, the Green Guarantee Company (GGC), our Managing Director Chris Clubb wrote a blog on what this could mean for the blended finance ecosystem and why he is paying attention.

The GGC will issue guarantees to credit enhance debt to climate mitigation and climate adaptation borrowers/projects undertaken in developing countries, making the Paris Agreement and SDGs investible in those countries for many prospective investors and mobilizing investors to climate impact investment.

[Read the blog now.](https://bit.ly/3SMITSX)

Convergence's top articles and publications for 2024

As climate challenges escalate, the importance of financing for climate adaptation is undeniable. As noted at the recently adjourned [COP29](https://unfccc.int/cop29/updates-archive), over 3.4 billion people live in regions that are highly vulnerable to climate change, threatening livelihoods and natural resources. However, adaptation efforts remain significantly underfunded worldwide. According to the [State of Blended Finance 2024: Climate Edition](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view), climate focused blended finance transactions make up half of all recorded deals, yet only 16% of all climate blended finance deals exclusively target adaptation.

At the same time, women often bear the brunt of climate-related disruptions in sectors such as agriculture, health, and water management. As we work towards climate resilience, it is critical to recognize the impact of climate change on women and girls, particularly in vulnerable regions. However, currently only [30% of the adaptation focused deals](https://www.convergence.finance/resource/blended-finance-and-the-gender-energy-nexus-a-stocktaking-report/view) in our database integrate gender considerations.

We believe that with the right financing models these challenges can be transformed into powerful opportunities for women, positioning them as both beneficiaries and agents of climate adaptation. Blended finance has emerged as a transformative tool in the climate finance space, driving investments into high-impact areas that traditionally face challenges in attracting private sector investment. When gender focused strategies are embedded in climate blended finance the benefits can be exponential, amplifying resilience and empowering communities.

Through Convergence’s design funding and market acceleration programs, we aim to support innovative blended finance vehicles that will help build a more resilient, inclusive financial landscape that recognizes gender equity as essential to climate adaptation.

Two grantees from the Global Affairs Canada (GAC) supported [Gender-Responsive Climate Finance Window](https://www.convergence.finance/design-funding/open-window/gender-responsive-climate-finance-window) (GRCF), Big Valley Advisors GmbH (Big Valley) and Villgro Innovations Foundation (Villgro), stand out as innovative leaders. Their unique approaches demonstrate how gender-sensitive climate adaptation projects can be structured to create lasting social and environmental impact.

__Big Valley: Strengthening Women’s role in Agriculture through Strategic Technical Assistance__

Big Valley, in collaboration with Puro.earth and CGIAR, is developing the [Ag360 Climate Fund](https://www.convergence.finance/design-funding/grant-portfolio/4bxjecjGF1Zn32Cl7wjOel/view), a $150 million blended finance vehicle designed to support circular bioeconomy solutions in the Global South. The Fund intends to build climate change resilience on over 60,000 hectares of land, by providing patient loans to scalable projects in smallholder intensive agriculture value chains, focused on valorizing agriculture waste (notably through biochar production), funding soil health improvements, decarbonizing value chains, and supporting conservation agriculture.

What makes Big Valley’s approach particularly compelling is its gender-smart strategy. Women play a central role in many of the agricultural value chains the Fund supports, from regenerative farming to waste repurposing. By investing in small and medium-sized enterprises (SMEs) that empower women, the Fund will not only protect women from the impacts of climate change but position them to benefit economically. The Fund will offer KPI-linked loans to companies targeting circularity and gender-responsiveness. A dedicated technical assistance facility (TAF) will pilot biochar projects in pioneering SMEs and cooperatives to increase the equitable adoption of regenerative practices. Through partnerships with local consultants and CGIAR, the TAF will help establish measurement, reporting, and verification (MRV) systems for agrifood SMEs, enabling them to track the transition to gender-based targets. By investing in agrifood businesses with women at the center—as leaders, entrepreneurs, and suppliers—the Fund will provide the necessary capital, tools, capacity, and resources to unlock the full potential of this innovative approach.

With grant funding support from the GRCF window, Big Valley is finalizing the structure of the Ag360 Climate Fund, developing a comprehensive gender strategy, a detailed gender action plan, and a robust TAF. To enhance financial resilience, the Fund will provide a cushion of at least 25% for senior investors, such as food corporations and large commodity traders, participating in the capital structure. Additionally, Big Valley has been selected to participate in the [2024 ICFA Cohort](https://www.icfa.lu/cohort/big-valley-gmbh/), further strengthening their position as a leader in gender-smart climate finance.

__Villgro: Scaling Climate-Responsive Social Enterprises for Women through Guarantees__

Villgro’s [Inclusive Climate Action Scaleup Facility](https://www.convergence.finance/design-funding/grant-portfolio/5Wq9XgwEb4H5sZhhAsepeW/view) uses blended finance to address the financing gap faced by gender-inclusive climate technology social enterprises in India. By providing credit guarantees to local financial institutions, Villgro unlocks critical domestic financing for gender-smart climate-resilient enterprises. The Facility focuses on enterprises across the agriculture, climate action, and health sectors that have the potential to generate green jobs, sustainable income streams for underserved communities, and improved health outcomes for women.The Facility is specifically designed to empower these enterprises by helping to scale their innovations and enable adoption among underserved populations in hard-to-reach markets, thereby improving both market access and financing.

The Facility will incorporate a gender lens into its selection criteria at both the enterprise and end-customer level, measuring impact on women's economic empowerment through increased income levels, access to credit, capacity building, and decision making within enterprises. Villgro recognizes that women are not a homogenous group and their needs may vary across geography, segment, and socio-economic status. They aim to customize their financial products with flexible loan structures, repayment terms, and financial literacy programs tailored to women's preferences and constraints. Risk mitigation measures, such as guarantees, will substitute for the lack of collateral from women borrowers and innovation focused enterprises. As such, blended finance plays a critical role in reducing both real and perceived risks, making these investments more appealing, particularly for private sector investors.

In this way, the Facility directly contributes to women’s financial independence by enhancing skills, helping women move up the value chain, and creating pathways for asset ownership. Villgro takes a bottom-up approach that prioritizes grassroot level community engagement and  actively involves women in decision making processes. Research conducted by Villgro has found that involving women as demonstration and sales champions enhances community engagement and acceptance, especially among women customers who feel more secure and comfortable, ultimately leading to greater customer satisfaction and impact.

Villgro is developing an impact framework, end-user repayment model, detailed gender action plan and finalizing the structure of the facility with grant funding support from Convergence. Villgro will continue to partner with local enterprises and service providers to collectively discuss various solutions, enhancing the facility’s effectiveness as a robust, gender-responsive blended finance structure for impactful decision making in climate adaptation.

__Turning Challenges into Opportunities__

Big Valley and Villgro showcase how blended finance can transform climate challenges into empowering opportunities for women, creating a blueprint for other practitioners in the ecosystem. As the world continues to grapple with the dual crises of climate change and gender inequality, solutions like these provide a practical way forward. They show us that with the right tools and strategies, we can build a future where resilience is inclusive and where women have the resources and opportunities to thrive, even in the face of climate adversity.

By funding and supporting early-stage initiatives, Convergence is actively shaping a sector that acknowledges the critical role of women in climate resilience. Convergence’s support includes not only financial assistance but also technical guidance, helping grantees identify the resources and expertise to integrate gender and climate goals effectively. This knowledge sharing ensures that funded projects under the GRCF window set a benchmark and high standard for workable gender-responsive climate adaptation financing solutions, creating a pipeline of investable solutions for emerging climate finance investors.

Transforming Climate Adaptation Challenges into Gender Opportunities through Blended Finance

Climate Adaptation and Gender in Blended Finance

*San Francisco* – November 25, 2024 – The Catalytic Climate Finance Facility (CC Facility), a partnership between [Climate Policy Initiative (CPI)](https://www.climatepolicyinitiative.org/) and [Convergence](https://www.convergence.finance/), announced its second cohort of market-ready blended finance vehicles today. The CC Facility will grant the selected five grantees USD 2 million to test, structure, launch, and expand solutions. 

These vehicles offer diverse climate finance solutions across various regions, including Sub-Saharan Africa, Southeast Asia, Latin America, and the Caribbean. They support a range of climate initiatives, such as climate-resilient agriculture, marine conservation, biodiversity, climate adaptation, and renewable energy, through blended finance solutions including debt, project finance platforms, and venture capital.

“The new CC Facility class is a direct response to the urgency for climate action. The need to mobilize trillions of dollars annually, particularly in high-risk emerging markets, is paramount. By focusing on critical areas like unlocking private capital, de-risking investments, and scaling climate finance, we are aligning our efforts with the global community's ambition,” said __Barbara Buchner, CPI’s Global Managing Director__. “The CC Facility is poised to address this challenge head-on.”

The selected vehicles have undergone a rigorous selection process, emerging from a pool of 243 submissions. Grantees will also receive customized technical assistance over 12 to 18 months to help accelerate the market roll-out of their blended climate finance solutions. 

“The CC Facility portfolio of financial vehicles, spanning climate-resilient agriculture, marine conservation, and renewable energy, is a testament to our commitment to steer the field of blended finance toward solving climate and development goals,” said __Convergence CEO Joan Larrea__. “The CC Facility is a systemic approach to catalyzing private sector investment in a sustainable future. We are proud to be at the forefront of the global climate finance movement.”

With funding from three anchor donors—Bill & Melinda Gates Foundation, Global Affairs Canada, and Australia's Department of Foreign Affairs and Trade—the CC Facility targets one of the main barriers to scaling a climate blended finance vehicle: the acceleration stage, when solutions face a critical valley of death as they try to scale to broader market implementation. Following the selection of this first class of blended finance vehicles, the CC Facility will open for its next cycle of applications on March 10, 2025.

“Canada congratulates the five grantees and looks forward to the launch of these blended finance vehicles that will support solar and hydro projects in fragile African states, as well as biodiversity, food security, and smallholder farmer livelihoods across Africa and Southeast Asia. Thanks to the partnership and expertise of Convergence and Climate Policy Initiative, the selection of these grantees is a testament to the catalytic potential of the private sector to deliver meaningful climate results,” said __Cam Do, Director General of Development Finance, Global Affairs Canada__.

__Introducing the Vehicles__ 

__[ADAPTA Climate Finance Facility (ACF)](https://www.ccfacility.org/portfolio/adapta-climate-finance-facility)__ will be a USD 50 million debt facility aimed at transforming agricultural finance and food security in Sub-Saharan Africa. By leveraging proprietary climate risk assessment technology, ACF aims to de-risk lending to smallholder farmers in Sub-Saharan Africa while promoting regenerative agricultural practices. The facility aims to enhance food security and farmer incomes while building regional climate resilience, beginning in Kenya.

__[Biodiversity Bridge Vehicle (BBV)](https://www.ccfacility.org/portfolio/biodiversity-bridge-vehicle)__ is envisioned to be a USD 100 million project finance platform that generates carbon and biodiversity credits through mixed-species reforestation projects. The vehicle will build on Ponterra’s approach to developing and operating biodiverse carbon projects by monetizing biodiversity uplift alongside carbon sequestration, thereby enhancing the affordability and feasibility of implementing high-integrity nature restoration projects.

__[Blue Alliance Blended Finance Vehicle](https://www.ccfacility.org/portfolio/blue-alliance-blended-finance-vehicle)__ is a USD 65 million blended facility that will support 2 million ha of Marine Protected Areas (MPAs) across Sub-Saharan Africa and Southeast Asia. The facility will enhance MPAs operations and develop reef-positive businesses in the Blue Economy that will alleviate poverty and generate long-term income for MPAs in sectors such as community-based aquaculture, ecotourism, sustainable fisheries, and blue carbon projects.

__[The Catalyst Fund Resilience I](https://www.ccfacility.org/portfolio/catalyst-fund-resilience-i)__ is a USD 40 million venture capital fund investing in pre-seed climate adaptation startups in Africa, with follow-on investments at seed and Series A stages. The fund targets three key areas: fintech for climate resilience, sustainable livelihoods, and climate-smart essential services. 

__[The P-REC Aggregation Facility (PAF)](https://www.ccfacility.org/portfolio/p-rec-aggregation-facility-paf)__ is envisioned to be a USD 11 million pilot project finance facility that mobilizes capital for solar and hydro mini-grid projects across 14 fragile countries in Sub-Saharan Africa through the origination, aggregation, and sale of Peace Renewable Energy Certificates (P-RECs) P-RECs are high-quality I-RECs generated from projects in fragile, climate-vulnerable, energy-poor countries. They are sold at a premium over traditional I-RECs due to their high social and environmental additionality.

__About the Catalytic Climate Finance Facility__ 
The Catalytic Climate Finance Facility (CC Facility) accelerates the implementation of high-impact, ready-to-scale financial structures through a suite of services that include grant funding, customized technical support, and a market-building learning hub. The CC Facility fills a market gap and reduces market fragmentation to mobilize private capital for climate action in developing economies. The CC Facility is a partnership between Climate Policy Initiative and Convergence.

The CC Facility has raised USD 13 million to date and is fundraising for a second round of USD 10 million as we move toward our goal of reaching USD 100 million in size over the next few years. 

__About Convergence__
Convergence is the global network for blended finance. On top of market acceleration through its Design Funding program, Convergence generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 160 public, private, and philanthropic investors as well as sponsors of transactions and funds.

Convergence’s Design Funding Program operates as a market acceleration tool providing early-stage capital to support blended finance solutions in frontier markets and nascent sectors to accelerate the number of investible transactions in market targeting SDGs.

__About Climate Policy Initiative__
CPI is an analysis and advisory organization with deep expertise in finance and policy. Our mission is to help governments, businesses, and financial institutions drive economic growth while addressing climate change. CPI has seven offices around the world, including Brazil, India, Indonesia, South Africa, the United Kingdom, and the United States.

CPI serves as the Secretariat for the Global Innovation Lab for Climate Finance (the Lab), an incubator program that develops innovative financial mechanisms to drive private investments into climate change mitigation and adaptation in developing economies. 

__MEDIA CONTACTS__ 

__Sijia Yi__ 
Head of Communications 
Convergence Blended Finance 
sijia.yi@convergence.finance 

__Júlio Lubianco__ 
Communications Manager 
Climate Policy Initiative 
julio.lubianco@cpiglobal.org

Catalytic Climate Finance Facility awards USD 2 million to new cohort of blended finance vehicles

CC Facility's second cohort of blended finance vehicles

The investment needs for climate mitigation and adaptation in low- and middle-income countries (LMICs) other than China is [estimated](https://www.worldbank.org/en/news/feature/2023/03/13/what-you-need-to-know-about-how-ccdrs-estimate-climate-finance-needs#:~:text=With%20this%20simple%20approach%2C%20and,year%20between%20now%20and%202030.) at $783 billion per year between now and 2030. While the World Bank [reports](https://openknowledge.worldbank.org/server/api/core/bitstreams/83f7aadd-dc5a-406b-98d4-9624e93993e5/content) that bonds are the most important debt instrument for these countries - comprising the majority of the $161 billion net debt inflows from private creditors to LMICs on average from 2018 to 2022 - there is a clear need for innovative climate financing structures to close the persistent investment gap.

While this need is urgent, blended finance to create climate bonds has remained relatively nascent. In Convergence’s Historical Deals Database (HDD) of blended finance transactions, bonds account for only 8% of the 1,233 deals. There is, however, growing interest to use blended finance for climate bonds; Convergence data [shows](https://www.convergence.finance/api/file/88d984f74160b7df482795ee0267f66b:4c76b20aa92457ff40e2fd0bc89a111fcc030e1af7d5dff392476ac8f9db2aa4ee25d95d2c6d386621e9968b8a4ed2798dbeb7ffa4d00dab9f8a48f3b1d323e6150c04957610a87f0c97c0233bf229adb0ee670799432cb89a711fa4df7d619e19922522aa2786201194d77f811733b66db394d972e9288e376afecf1619b358f1fa55ca995a132e2f1a4f613d2c9834) that in climate-related transactions, blended finance bonds were deployed more in 2023 than in previous years. As a proportion of annual climate financing volume, “blended climate bonds” have grown from 2% of total climate blended finance in 2017 to 9% in 2023.

In our [post](https://www.convergence.finance/news-and-events/news/1C6NFH0hAla85XqtZ6NmXu/view) on 2024 blended finance trends, Convergence noted that there are increasing opportunities to use blended finance to promote green, social, sustainable, sustainability-linked and other (GSS+) bonds. As one of the lesser-used vehicles, it is worth a deeper look at why blended bonds are an important instrument and how blended finance can be used to encourage its uptake in climate initiatives.

__Understanding bonds as important debt instruments__

One of the biggest benefits of bonds as a debt instrument is that they are typically publicly listed and traded – thereby increasing liquidity, unlike other debt instruments (e.g. loans and notes), which are more frequently closed through private transactions. Continuing to originate and structure debt as loans or notes in private markets means transactions are mostly unavailable to a large number of investors. Through publicly listed bonds, a larger investor pool can be reached, thereby increasing investor demand and investment volumes and decreasing interest rates. Public trading of bonds reduces the uncertainty of market price, since high trading volumes help ensure the true value of the underlying asset.

Most investors require bond issuers to be rated by credit rating agencies such as Moody’s, S&P, or Fitch. The main driver of a bond rating in any country is the sovereign risk rating, known as the sovereign ceiling. Bonds issued in countries with weak ratings (e.g., B or lower) lie beyond the fiduciary and regulatory investment mandates of most global debt investors (generally, investment grade BBB). A huge challenge of using bonds in emerging markets is the limited number of issuers that meet investors’ fiduciary and regulatory investment risk mandates (e.g., 76% of developing countries are rated B or lower).

Blended finance can be used to address the risk challenge by structuring bonds to fit within investors’ risk mandates and provide market risk-adjusted returns, thereby overcoming the sovereign ceiling and improving the creditworthiness of the issuer.

__Blended finance funds to increase the creditworthiness of bonds__

There are several blended finance approaches to create a bond that meets investors’ investment risk mandates. The simplest is for a more creditworthy guarantor to provide a guarantee for the bond; for example the World Bank Group (rated AAA) or a private entity like GuarantCo or Green Guarantee Company issuing an investment grade guarantee (A and BBB respectively).

An alternative effective and efficient approach is through creating a tiered blended finance fund that invests in climate debt (e.g., loans, notes and bonds) in developing countries. For example, a fund can be established with three tranches of capital: senior, mezzanine, and junior. The junior tranche is essential for success; it is the most catalytic tranche since it faces the highest risk – typically beyond the ability or willingness of multilateral development banks (MDBs) and development finance institutions (DFIs) to invest. It is typically financed by climate impact organizations like country members of the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC), the Green Climate Fund (GCF), or philanthropic foundations. The mezzanine tranche should be structured to be investible by MDBs, DFIs, and high-yield investors, for example rated CCC or B with commensurate return.

The diversification of assets in the fund and the 10% to 20% subordination allows the senior tranche to be in the form of an investment grade (e.g., BBB) bond. In general, BBB rated bonds that are listed and traded, liquid, and large enough, allow almost all debt investors to invest. 

Using blended funds to support the issuance of climate bonds is the most effective and efficient approach for several reasons:
- *High scalability:* A fund issuing bonds can be sized from $200 million to $20+ billion. Investors want size, but most climate projects do not require the large amount of debt to justify a bond – aggregating debt to many projects creates the necessary size for bonds.
- *Diversification:* A fund delivers country and borrower diversification, and usually achieves a two-notch upgrade delivering one-quarter of the required credit enhancement (subordination delivering the other three-quarters).
- *Effective use of capital:* While a full guarantee protects the total amount of the bond to overcome the sovereign ceiling, this may not be the best use of scarce concessional public funding. Most public sector issuers of guarantees are AAA or AA rated MDBs (e.g., Multilateral Investment Guarantee Agency) or developed countries (e.g., Germany). Debt investors neither need nor want such strong guarantees. Rather, they need to be credit enhanced beyond underlying CCC and B risk of the borrower. In general, a low investment grade rating (e.g., BBB) is sufficient and preferred to mobilize private capital. Tiered funds can issue investment grade bonds as the senior capital, and non-investment grade bonds as the mezzanine capital, which frees up large amounts of public capital to invest directly for impact and leverage additional funds.
- *Sufficient at de-risking:* Other means of blending, such as partial guarantees, are likely less effective since credit rating agencies’ methodology for partial guarantees is to provide only a one- to two-notch upgrade from the underlying risk. Therefore, if the underlying risk is CCC, a partial guarantee would likely upgrade the bond to B-, which is still beyond the fiduciary and regulatory mandate of most debt investors. With a multi-tiered fund, the combination of diversification and catalytic junior and mezzanine tranches allow the senior capital to be an investment grade bond.
 

__GSS+ Bond Certification__

While blended finance structures increase the creditworthiness of bonds, bond certification can help further mobilize private capital into the asset class. Through its bond certification program, called the [Climate Bonds Standard and Certification Scheme](https://www.climatebonds.net/certification/get-certified), CBI encourages investment in GSS+ bonds by supporting investor confidence in the climate change credentials of green bonds and other instruments. The program is designed to assist investors and governments in prioritizing investments that address climate change, using a science-based approach consistent with the goals of the Paris Climate Agreement to limit warming to 1.5 degrees Celsius.

CBI believes that investing in reputable GSS+ bonds—those with Climate Bonds Certification or a solid Second Party Opinion—gives investors confidence in the bond's environmental credentials. This approach broadens the range of eligible green investments since investors are not limited to exclusively green companies, and it also lessens the need for extensive due diligence because GSS+ issuers are expected to provide post-issuance reporting.

Overall, blended bonds at risk ratings aligned to fiduciary and regulatory mandates offer an important and growing opportunity for investors to diversify their portfolios and engage in climate-friendly investments. While organizations such as CBI are advocating for the creation of more transparent and responsible GSS+ bonds, concessional finance can be used to address perceived and real risks associated with these bonds.

*Convergence and CBI will hold an information session on climate blended bonds on November 25, 2024 at 10am ET. Please register [here](https://www.convergence.finance/calendar/6VpjWDxDCHBqYrWlUNNEbB/view). Please direct any enquiries to robin.ivory@convergence.finance.*

Learn why blended bonds are an important instrument and how blended finance can be used to encourage its uptake in climate initiatives.

Blended finance for climate bonds

As climate change continues to be a pressing global concern, climate finance remains a central focus of sustainable development. In this context, carbon markets have emerged as one avenue for companies and countries to mitigate their current emissions and meet climate targets. By pricing carbon through carbon credits, these markets are designed to encourage carbon emitters to internalize the negative externalities associated with emissions. While carbon credits have been met with criticism regarding the transparency of markets, the legitimacy of credit-verification methodologies, and the markets’ greenwashing practices, they have the potential to be a useful solution for climate change mitigation and adaptation. Climate Policy Initiative (CPI), [reports](https://www.climatepolicyinitiative.org/wp-content/uploads/2023/09/How-big-is-the-Net-Zero-financing-gap-2023.pdf) $6.2 trillion of climate finance is required between now and 2030 to meet companies’ Net Zero requirements. As the carbon markets gain credibility through improved industry guidelines, blended finance can be a valuable tool in de-risking these investments and increasing private sector participation.

__Carbon credits__

Formally introduced to the global market in 2005, carbon credits became a central component of the Kyoto Protocol and later, the Paris Agreement under Article 6. Commonly referred to as emission trading schemes (ETS), carbon credits were created to help countries meet their emission reduction targets. A carbon credit [represents](https://www.convergence.finance/api/file/37b2d355392c831604ba1581f7549e93:30b0ba1250a802dde73ffa8008ec8aa9de72b7f55e5a25c70456ae41bef4789e3300f342e043a4e3f89a9aeb890866751b3d3cf9520dd7bf22b920e3b4da7548bd7e4aa78c4a486b01defb249f0e50614b4a4d5c566722ac32067daed456291bfd2dd96ea2ecb9d7a1acd92027d08483a08e9e97fa50163a45d10416fc053e0ba1dc93904f531cfa4ac92a61798d871c) one metric tonne of greenhouse gas (GHG) emissions reduced, avoided, or removed in the atmosphere because of an emissions-focused project or activity. Carbon credits can be generated through nature-based solutions (NbS) such as afforestation, reforestation, and reduced deforestation efforts, or technology-based solutions such as renewable energy projects, carbon capture practices, or clean-cooking technology. Accreditation agencies verify carbon credits sold to buyers, aiming to offset the GHG emissions that cannot be reduced through internal, operational changes.

__Carbon markets__

The carbon market [is a](https://www.convergence.finance/api/file/37b2d355392c831604ba1581f7549e93:30b0ba1250a802dde73ffa8008ec8aa9de72b7f55e5a25c70456ae41bef4789e3300f342e043a4e3f89a9aeb890866751b3d3cf9520dd7bf22b920e3b4da7548bd7e4aa78c4a486b01defb249f0e50614b4a4d5c566722ac32067daed456291bfd2dd96ea2ecb9d7a1acd92027d08483a08e9e97fa50163a45d10416fc053e0ba1dc93904f531cfa4ac92a61798d871c) specialized financial system where credits are traded by various actors, including companies, banks and project developers, amongst others. There are two main types of carbon markets where credits can be produced, bought and sold: the compliance and voluntary markets. 

The compliance carbon market (CCM) [is established](https://climatepromise.undp.org/news-and-stories/what-are-carbon-markets-and-why-are-they-important) by regional, national, and international regulatory bodies to reduce GHG emissions. CCM actors– typically companies operating in participating regions–must adhere to mandated emission limits. The voluntary carbon market (VCM) [is a](https://www.unep.org/topics/climate-action/climate-finance/carbon-markets#:~:text=Carbon%20markets%20are%20carbon%20pricing,carbon%20markets%3A%20Compliance%20and%20voluntary.) decentralized market where actors, including individuals, project developers, companies, banks, or even regions, voluntarily participate in producing, purchasing, and selling carbon credits. In the VCM, buyers and sellers of carbon credits are not obligated to meet certain emissions targets, but participate in reducing or offsetting their carbon emissions individually or as part of an industry. Due to the market's decentralized nature, various standards and certification programs exist to verify emission reductions and facilitate the distribution of carbon credits. Despite structural differences, the two markets share a similar goal of achieving global climate targets by cost-effectively reducing carbon emissions. In 2023, the CCM [was valued](https://www.reuters.com/markets/commodities/global-carbon-markets-value-hit-record-949-bln-last-year-lseg-2024-02-12/) at over $900 billion, while the VCM [was valued](https://about.bnef.com/blog/carbon-credits-face-biggest-test-yet-could-reach-238-ton-in-2050-according-to-bloombergnef-report/#:~:text=The%20market%20would%20peak%20at,and%20%24172%2Fton%20in%202050.) at $2 billion. 

__Considerations and challenges__

Despite the potential for carbon markets, it is important to recognize that the VCM is still in its early stages, facing growing pains that investors should consider before providing financing. A primary barrier influencing the integrity of VCMs is the lack of established regulations and standards. As a decentralized market, the VCM lacks a unified credit verification mechanism. Verification depends on certification agencies' self-determined methodologies, resulting in a wide array of what constitutes a "credit." This self-reliant verification system makes distinguishing authentic programs from greenwashing (where firms exaggerate their environmental efforts to appear more sustainable to the public) carbon credit activities and sales difficult. Moreover, certification agencies' prescriptive calculations for determining avoided emissions raise concerns that such calculations may not accurately account for the unique geographic landscapes and conditions where these emission avoidance projects occur. 

Lastly, the carbon market allows companies to commit to net-zero targets by relying primarily on purchasing carbon credits rather than adapting internal practices and technology to reduce emissions. For effective climate action, carbon credits should complement decarbonization efforts within businesses rather than serve as the sole strategy to meet net-zero goals.

There are, however, ongoing efforts to strengthen the credibility of the VCM through guidelines and best-practice documents. Namely, Article 6 of the Paris Agreement facilitates voluntary international cooperation among countries to meet their Nationally Determined Contributions (NDCs). Specifically, Article 6.4 establishes a framework for a centralized, global carbon market. In addition, in June 2022, the World Resources Institute (WRI) [released](https://www.wri.org/technical-perspectives/guidance-voluntary-use-nature-based-solution-carbon-credits-through-2040) *Guidance on Voluntary Use of Nature-based Solution Carbon Credits Through 2040*, and in 2024, the U.S. Government [issued](https://www.whitehouse.gov/wp-content/uploads/2024/05/VCM-Joint-Policy-Statement-and-Principles.pdf) a *Voluntary Carbon Markets Joint Policy Statement and Principles* document advocating for increased transparency of credited projects, robust third-party verification of credits, reduction of leakage and double counting, and adoption of practices that respect human rights. Organizations such as the [Voluntary Carbon Markets Integrity Initiative](https://vcmintegrity.org/) (VCMI) and the [Integrity Council for the Voluntary Carbon Market](https://icvcm.org/) (ICVCM) have also emerged to contribute to the VCM regulation conversation. The discussion of regulating the VCM was also an agenda item at COP28, and the discussion is anticipated to continue at COP29.

__Opportunities for Blended Finance__

Blended finance is uniquely positioned to support VCM alignment with regulatory initiatives by building the capacity of project developers to meet standards set forth by policy bodies and by promoting market transparency, through for example technical assistance (TA). Blended finance can also be leveraged to increase private sector confidence in carbon credit-linked projects. Some private investors remain hesitant about funding carbon credit vehicles, given concerns about the project’s ability to deliver credits at the needed volume or quality, and the volatility of carbon prices in recent years. Blended finance tools, such as concessional risk insurance can help boost investor confidence and reduce perceived risks. 

Similarly, a catalytic party taking a first-loss position in the transaction, and thus taking on disproportionate exposure to the risk that the carbon revenue will not materialize, can protect senior, commercial investors in the capital stack. Private commercial capital refers to institutional and individual investors, including commercial banks, investment management firms, family offices, pension funds, etc. These investors operate under strict mandates, focused on protecting clients’ capital and generating secure returns. The presence of a junior, first-loss tier in a transaction brings the risk-return profile of their senior investment into alignment with their needs. 

However, there are limitations to blended finance in the VCM. While in the short term, it can attract private investment by reducing the risk profile and demonstrating the viability of initiatives, the ultimate goal of blended finance is to help develop mature markets where investments become commercially sustainable and no longer rely on concessional funding. Blended finance is not designed to be a permanent solution, but to build investor confidence and market readiness. For long-term commercial success in the VCM, stricter regulations, compliance mechanisms by policymakers, and improved market transparency by industry actors are essential.

__Examples of Blended Finance in the VCM__

Convergence has tracked various blended finance deals that leverage carbon credits to generate climate and social benefits. These deals demonstrate how blended finance can support pioneering transactions in the VCM and create important knowledge spillovers. For example, the Livelihoods Carbon Funds (LCF), which has launched three sub-funds thus far. The latest installment of the fund, LCF III, [launched](https://livelihoods.eu/lcf/) in 2021 and focuses on providing financing to project developers for ecosystem restoration, agroforestry, and rural energy projects. The fund seeks to improve food security for rural communities and income for smallholder farmers. Fund investors then receive carbon credits generated from these projects in return for their financial contributions. LCF III, [received](https://www.thegef.org/projects-operations/projects/10500) a grant from Global Environment Facility (GEF), through Conservation International to help seed the fund, [as well as](https://www.dfc.gov/media/press-releases/dfc-approves-11-values-based-investments-totaling-nearly-364-million-address) a partial credit-default guarantee from U.S International Development Finance Corporation (DFC), to provide risk protection against the uncertainties of the investment, making it more attractive to commercial investors. The fund aims to sequester nearly 30 million tons of carbon dioxide (CO2) in the next 20 years and to benefit two million people. 

Blended finance can also aid the evolution of the VCM through TA, which can help establish a project’s credibility by improving the investment-readiness of carbon-linked transactions, providing capacity building, subsidizing operational costs, and supporting the accurate measurement, monitoring, and reporting of emissions. An example of a blended transaction using TA is Café Selva Norte, which [aids](https://www.idhsustainabletrade.com/uploaded/2020/02/LDN-Report-5.3-Peru.pdf) smallholder farmers in Peru's transition to sustainable land practices. The project provides access to financing for smallholder coffee farmers to improve degraded coffee plantation infrastructure and operations, thereby improving product quality and generating land restoration and forestry co-benefits. The rehabilitated coffee plants and other agroforestry initiatives are expected to sequester 3.8 million tonnes of CO2, which will be converted into verified credits. The initiative received a TA grant from the Land Degradation Neutrality Fund to assist community co-operatives in establishing accurate baseline monitoring mechanisms for environmental returns. 

Finally, Terra Global Capital, a leading NbS investment firm, [has managed](https://www.terraglobalcapital.com/) and contributed to funds focused on reducing carbon emissions through NbS. In 2011, the firm launched the Terra Global Fund to finance agroforestry small and medium sized enterprises (SMEs), integrating emission reduction strategies into their operations and generating verified carbon credits. The fund received political risk insurance from the Overseas Private Investment Corporation (OPIC) due to the limited carbon market sector knowledge at the time. Recently, Terra Global began fundraising for the Terra Bella NbS Carbon Pool Fund [to support](https://www.terraglobalcapital.com/terra-bella-fund-0) rural income growth in emerging markets through projects that generate nature-based credits by reducing deforestation and reforestation initiatives. The fund will use blended finance to create a TA facility. The facility will provide support to community-level projects to improve their bankability and provide training on sustainable land practices and carbon emission recording. Given the lack of regulation and market volatility in the VCM, blended finance can improve these projects' risk/return profile to investors and stimulate economic growth for agri-dependent communities.

__Conclusion__

Despite challenges, carbon markets have the potential to boost financial flows toward climate efforts. The markets’ success and integrity, however, hinge on establishing industry-wide best practices, increasing transparency in carbon-linked initiatives and implementing robust credit verification protocols. Carbon credit-linked projects are increasingly integrated into blended finance transactions, with blended finance proving out and demonstrating to commercial investors their viability. As the VCM evolves, blended finance can support bringing carbon-linked initiatives to market and providing the necessary transaction and impact data investors need to assess the risks and returns.

As climate change continues to be a pressing global concern, climate finance remains a central focus of sustainable development. Carbon markets have emerged as one avenue for companies and countries to mitigate current emissions and meet climate targets. 

Legitimizing Carbon Markets: The Role of Blended Finance

*This op-ed was originally published in [The Citizen](https://www.thecitizen.co.tz/tanzania).*

Tanzania is sometimes referred to as a “Lion Economy” due to the rapid economic growth of nearly 7% that the country has witnessed since 2000. This is underpinned by a burgeoning young population, vast agricultural potential, and abundant natural resources. After two decades of sustained growth, Tanzania reached an important milestone in 2020, when it formally graduated from low-income to lower-middle income country status.

However, exogenous events, such as COVID-19 and the war in Ukraine, have resulted in economic shocks that have dampened its growth trajectory. According to the African Development Bank (AfDB), the country is projected to grow at 5.7% in 2024 as compared to 5.3% in 2023. Returning to pre-COVID-19 growth rates will hinge on the country shifting to a private sector-led growth model.

Tanzania’s Ministry of Finance as part of its Alternative Project Financing Strategy and FYDP III financing strategy has identified blended finance as an important non-traditional financing tool to mobilize private capital. As traditional sources of financing (on the balance sheet and Official Development Assistance) become more limited, Tanzania’s new economic blueprint needs to identify blended finance as a means of leveraging private capital to achieve its development objectives. The opportunity is there. According to [Convergence](https://www.convergence.finance/resource/state-of-blended-finance-2024/view), the global network for blended finance, Tanzania ranks fifth in Sub-Saharan Africa on the frequency of blended transactions.

During our recent UNDP supported mission to survey innovative financing transactions in Dar es Salaam and Zanzibar, we were encouraged by the various blended finance innovations we encountered. What is noteworthy is that these transactions have been executed within the traditional financial architecture which, in our opinion, provides greater room for scaling private capital mobilization.

Take the banking sector for example, two of the largest banks, CRDB Bank and NMB Bank, have used blended finance to bring down the cost of their listed bond issuances. CRDB Bank issued a $300 million green bond listed on the Dar es Salaam Stock Exchange (DSE), where the International Finance Corporation (IFC) acted as an anchor investor with a  $20 million subscription. Similarly, NMB Bank’s $17.4 million gender bond and $159 million sustainability bond (issued in 2022 and 2023 respectively) were also anchored by IFC.

In both cases IFC’s participation was supported by the International Development Association's (IDA) Private Sector Window Local Currency Facility, through which it leverages the IDA’s concessional resources and blends it with its own account to bring down the overall pricing of bond issuances where IFC is participating.  Both banks on lent the proceeds to development-oriented sectors such as renewable energy, energy efficiency, green mobility, and women-led/women-owned small and medium enterprises which erstwhile have struggled to secure appropriately priced capital.

The country’s national development bank i.e., Tanzania Agricultural Development Bank (TADB), fully owned by the government, has been instrumental in using blended finance to deliver development impact. The need for appropriate collateral is often a barrier for smallholder farmers when it comes to securing financing from financial institutions. In response TADB operates a smallholder credit guarantee scheme where it provides partner financial institutions with 50-70% of cash cover to guarantee their loan portfolio.

This de-risking approach has led to approximately $117 million of additional financing being disbursed across over 23,000 direct beneficiaries. Additionally, through partnerships with private sector financial institutions, TADB engages in co-financing arrangements. This allows TADB to play  a catalytic role by mobilizing resources from its own balance sheet and blending these funds with financing from commercial banks and development partners in the form of debt, equity, and/or grants to support agri-sector projects.

There are also more examples of smaller scale deals aimed at catalyzing private finance. [Daraja Impact](https://www.seaf.com/daraja-impact/), a project supported by the Swiss Agency for Development and Cooperation (SDC), uses impact-linked financial instruments and technical assistance to catalyze private sector funding. [Private Agricultural Sector Support (PASS) Trust](https://pass.or.tz/) and [Aceli Africa](https://aceliafrica.org/), both supported by a range of donor agencies such as Sweden International Development Agency (Sida) and Global Affairs Canada (GAC), provide partial  portfolio credit guarantees (and origination incentives in the case of Aceli) to financial intermediaries to de-risk their lending to the agriculture sector. 

Additionally, [The Africa Enterprise Challenge Fund](https://www.aecfafrica.org/), which supports agriculture and renewable energy enterprises, provides catalytic patient capital to commercialize new business models, companies, and technologies through a challenge fund approach.

There is also scope for the Government of Tanzania to play a more active role in using its own sources to blend its financing with that of the private sector. We can look to Ghana and Rwanda for inspiration, where government/quasi-government agencies have played key roles in private capital mobilization.

The Ghana Infrastructure Investment Fund (GIIF), set up in 2021, is a permanent vehicle seeded with $345 million of funding from the Ghanaian government that de-risks and invests alongside private capital. In Rwanda, the Rwanda Green fund, has the mandate to provide growth capital to high impact ventures to mobilize additional green investment and build an ecosystem. Both examples can help shape how the Tanzanian government uses blended finance to stimulate economic growth and create impact.

With a government that is attuned to economic growth and committed to uplifting living standards, Tanzania is on the cusp of economic transformation. With a coordinated effort between private, public, and philanthropic institutions and de-risking support from development agencies, blended finance can play a pivotal role in enabling Tanzania to achieve its true potential and taking its rightful place as Africa’s economic powerhouse.


Learn how blended finance can help Tanzania drive growth

How Tanzania is leveraging blended finance to drive growth

Growing evidence [demonstrates](https://blogs.worldbank.org/en/climatechange/people-and-planet-together-why-women-and-girls-are-heart-climate-action) that women play a critical role in achieving climate goals; both as leaders in advancing climate solutions, as well as beneficiaries. There is therefore an urgent need for more investments into transactions that incorporate both gender and climate considerations.

Yet, mainstreaming gender within climate vehicles often encounters a myriad of barriers. This is apparent in the blended finance market, where out of the 550 or so climate blended finance deals in Convergence’s Historical Deals Database (HDD), only 22% were gender-responsive, a considerably lower proportion than the overall trend in the blended finance market where 31% of the deals were gender-responsive. Recognizing this, the Catalytic Climate Finance Facility (CC Facility) Learning Hub recently released its inaugural [report](https://www.ccfacility.org/learning-hub/blended-finance-gender-energy-nexus-report) on gender-responsive blended climate finance transactions in the energy sector. The report provides an analysis of the data behind these transactions and highlights case study examples. It also explores the challenges to successfully launching gender-energy blended transactions and suggests recommendations for investors and practitioners to help increase their effectiveness in implementing these deals.

A commonly discussed challenge was simultaneously addressing climate and gender objectives within the same transaction. Often, investors approach each in a silo, understanding one of the objectives but failing to be proficient in the other type of impact strategy. This is especially the case for smaller funds that do not possess large technical assistance (TA) facilities, or for institutions with limited resources that must prioritize impact measurement and monitoring for a single or small set of objectives. 

A lack of standardized frameworks and metrics for these dual objectives further complicates efforts. While climate metrics, especially those for mitigation, are more established, investors and practitioners repeatedly signaled the lack of standardization in gender-related metrics as a significant challenge for structuring and investing in gender-responsive climate transactions. Moreover, limited or non-disaggregated data can also make globally recognized metrics and criteria neither useful nor relevant.

The report suggests several ways of overcoming these challenges to integrate both gender and climate within a transaction. One is through monetizing the gender co-benefits of climate vehicles through gender credits. Co-benefits [are](https://unfccc.int/files/gender_and_climate_change/application/pdf/egmreport.pdf) advantages that climate solutions provide above and beyond helping to fight climate change. Articulating the gender co-benefits of a climate transaction can be strategic since it capitalizes on investor demand for climate while adding a premium for gender equality. The second method is by using TA and financial incentives simultaneously to hit gender key performance indicators (KPIs) within climate transactions. 

__Monetizing gender co-benefits__

Two cases demonstrate how gender co-benefits can be monetized through the sale of gender credits.
The first is the [Clean Impact Bond (CIB)](https://sistema.bio/wp-content/uploads/IFC_Clean_Impact_Bond.pdf), launched by Sistema.bio in 2022. The CIB is a type of development impact bond that contributes to the broader use of clean cooking technologies by increasing access to clean appliances for low-income customers across Africa. It does this by drawing on upfront funding for small- and medium-sized enterprises (SMEs) that manufacture and distribute these appliances. The outcome buyer will purchase the health and gender co-benefits generated from the use of these appliances, as a type of credit. Considering women are largely the demographic positively affected by clean cooking, co-gender benefits can play an important role in such a vehicle.

The CIB demonstrates that there is a viable way to monetize gender co-benefits in the climate finance market by accomplishing two crucial outcomes: i) it provides data-driven metrics for quantifying the impact and monetary value of gender and health, and ii) it demonstrates the existence of willing buyers for gender and health co-benefits, indicating the potential market demand for gender. In this way, the CIB offers a starting point for determining a revenue stream for gender credits, as well as identifying the presence of outcome funders.

The second case that exemplifies the use of gender credits is the [W+ Standard](https://www.wocan.org/projects/buy-w-credits/) issued by WOCAN. The W+ Standard allows projects to certify quantifiable contributions to women’s empowerment and emissions reduction. For example, carbon emissions reduction projects that deliver benefits to women can add the W+ Standard to their existing projects, which can then be sold for a premium price to carbon buyers seeking co-benefits for gender equality/women’s empowerment, or to address SDG 5 (Gender Equality). One credit is equivalent to a 10% improvement in the lives of women in the project community.1 The W+ Standard requires that at least 20% of the price of the sold credit is provided to women of the project community, to support their self-determined goals. In general, incorporating gender credits into a transaction can encourage more rigorous tracking and reporting on gender-related outcomes, leading to greater transparency and accountability in how investments impact women and gender equality.

__Using TA and financial incentives to incorporate a gender-lens__

A further recommendation within the report for incorporating a gender-lens in climate transactions is to deploy TA and financial incentives together to achieve complementary goals. One barrier to incorporating a gender-lens is the lack of knowledge of how to do so; targeted TA can provide the necessary training to help a deal sponsor develop and measure gender outcomes. Financial incentives can then be an important tool to encourage companies to follow-through and meet these established goals.

An example of a transaction that has done this is the [Beyond Finance Asia-Pacific Facility](https://www.convergence.finance/design-funding/grant-portfolio/3gK51dZsW84lJMQ4q3BTei/view), a blended finance initiative that aims to enhance women’s access to funding and essential services in the Asia-Pacific and sub-Saharan Africa regions. Beyond Finance uses TA to help incorporate a gender-lens in the development of climate adaptation products. When KPIs are achieved, it triggers the provision of interest rate reductions for investees.

Meanwhile, Deetken Impact, a fund manager, [uses](https://deetkenimpact.com/gender-lens-investing/) TA to improve the gender scores of its portfolio companies. As part of its due diligence process, Deetken devised a gender scorecard that covers five main principles: women in leadership and governance; workplace equity; professional development programs for women; value chain and advocacy; and community engagement. Through their TA training programs, they have been able to improve outcomes across each of these focus areas, deepening impacts and moving beyond simple headcounts. Deetken uses TA to improve gender outcomes within large-scale solar projects while partnering with Inter-American Development Bank (IDB) Invest, which provides financial incentives in the form of lower interest rates to encourage a transaction to hit its climate and gender milestones.

These cases demonstrates that while financial incentives can be a powerful motivator for prioritizing gender outcomes, TA-enabled advisory support is a necessary precursor to creating and reaching reasonable and customized targets based on the specifics of the transaction.

__Conclusion__

Whether a transaction uses gender credits to monetize the co-benefits of gender in climate transactions or incentivizes gender-lens investing through deploying financial instruments and TA simultaneously, there are opportunities for blended finance deal sponsors to break down silos to achieve dual social goals. Gender credits can help create a scalable, standardized framework for investors to understand the impacts of gender-lens investing. Meanwhile, gender advisory support can help transactions meet KPIs, and even unlock financial incentives such as reduced interest rates, that create momentum for reaching gender goals. By adopting these strategies, investors can more effectively align their financial goals with broader social and environmental impacts, driving progress towards a just and resilient transition.

1 For more information on how these credits are measured, visit the [W+ website](https://www.wplus.org/).

Breaking Down Silos: Integrating Gender and Climate Goals in Blended Finance Transactions

Integrating Gender & Climate in Blended Finance Transactions

*SINGAPORE | November 1, 2024* — The Rockefeller Foundation has awarded a grant to Convergence to enhance local mobilization of private capital towards climate action in emerging economies in Southeast Asia.

Developing countries in Southeast Asia typically have a higher-than-average exposure to climate-related shocks. These countries often have weak coping capacity due to a lack of financing, infrastructure, and institutional capacity. To date, climate adaptation and mitigation solutions in the region have been small scale, too risky, and funded mostly by public and philanthropic investors. Blended finance can mobilize new sources of capital from private investors, especially domestic institutional investors, to facilitate long-term solutions and partnerships that are instrumental in strengthening local capital markets and supporting vulnerable communities.

![rockefellerpr photo](//images.ctfassets.net/4cgqlwde6qy0/5ZvzBqEh8IhXYPD6qHAvX/caf566c4ecec1e5f3641d9bcd4eba585/rockefellerpr_photo.png)
*L to R: Eric Arndt, Director - Asia Regional Office, The Rockefeller Foundation; Ritesh Thakkar, Senior Advisor and Head of Asia Pacific, Convergence; Deepali Khanna, Vice President – Asia, The Rockefeller Foundation*

The funding from this grant will support two important blended finance initiatives: Convergence’s Asia Climate Solutions Design Grant Window (ACS) and the Catalytic Climate Finance Facility (CC Facility) Learning Hub, a joint initiative by Convergence and the Climate Policy Initiative (CPI). 

The ACS is a pioneering design funding program that supports the inception, design, and launch of innovative catalytic blended finance solutions. These solutions are geared towards accelerating climate adaptation and mitigation across developing markets in Asia. The funding from The Rockefeller Foundation will support solutions with innovative models of mobilizing local capital in key Southeast Asian markets like Indonesia, the Philippines, and Vietnam. 

“The lack of climate investments in the region presents a key barrier to climate action,” __says Ritesh Thakkar, Senior Advisor and Head of Asia Pacific at Convergence__. “With this funding, we hope to create a pipeline of investable blended finance solutions that will raise awareness of blended finance in the region and demonstrate how it can mobilize local financing at scale to address climate change and its adverse impacts on vulnerable communities.”

Understanding the enabling environments needed for blended finance to mobilize domestic capital—including the roles of policymakers, regulators, and local capital markets—is crucial. To this end, the Learning Hub aims to gather data, analytics, and critical insights from the ACS design funding portfolio and the wider climate finance ecosystem, enriching the field with indispensable knowledge and practices.

“This funding will support the Learning Hub in enhancing local capacity through knowledge-sharing in Southeast Asia,” __says Joan Larrea, CEO at Convergence__. “Using comprehensive data and research by CPI and Convergence, the Hub seeks to accelerate the adoption of climate blended finance structures, engage domestic private capital, and drive positive socio-economic and environmental outcomes.”

“Supporting solutions at the intersection of people, planet, and capital is central to The Rockefeller Foundation’s strategy to create opportunity while helping reverse the climate crisis,” __notes Deepali Khanna, Vice President - Asia at The Rockefeller Foundation__. “Our grant to Convergence will help unlock those kinds of solutions by mobilizing new sources of capital from private investors and facilitating long-term partnerships for green growth.”

__*The next cycle of the ACS Design Funding Window has launched, the deadline to apply is November 22, 2024. Find out more and apply [here](https://www.convergence.finance/design-funding/open-window/Asia-climate-solutions-design-grant)*.__

__About Convergence__ 
[Convergence](https://www.convergence.finance/) is the global network for blended finance. We exist to increase private investment in emerging markets and developing economies to advance the UN Sustainable Development Goals and Paris Agreement. Our members include private investors looking to diversify their portfolios, businesses seeking capital, as well as public agencies and philanthropic foundations looking to make their funds go further.

Convergence’s [Design Funding Program](https://www.convergence.finance/design-funding) operates as a market acceleration platform providing early-stage capital to support blended finance solutions in developing markets and nascent sectors to accelerate the number of investible transactions in the market targeting SDGs.

__About the CC Facility__ 
The [Catalytic Climate Finance Facility](https://www.ccfacility.org/) (CC Facility) is a partnership between Convergence and the Climate Policy Initiative (CPI) to accelerate the implementation of high-impact, ready-to-scale financial structures, filling a market gap in mobilizing private capital for climate action in developing economies. The initiative aims to be an ecosystem builder and address a market need in scaling blended finance structures and catalyzing capital for climate change.

__About the CC Facility Learning Hub__ 
The [Learning Hub](https://www.ccfacility.org/learning-hub) is CC Facility’s knowledge-sharing platform which aims to provide evidence and best practices that will help accelerate the implementation of climate blended finance structures, mobilize private capital, and achieve socioeconomic and environmental impacts. 

__About The Rockefeller Foundation__ 
[The Rockefeller Foundation](https://www.rockefellerfoundation.org/) is a pioneering philanthropy built on collaborative partnerships at the frontiers of science, technology, and innovation that enable individuals, families, and communities to flourish. We make big bets to promote the well-being of humanity. Today, we are focused on advancing human opportunity and reversing the climate crisis by transforming systems in food, health, energy, and finance.

__Media Contacts__ 
Gurpratap Singh 
Asia Communications Consultant, The Rockefeller Foundation 
c-gsingh@rockfound.org

Sijia Yi 
Head of Communications, Convergence 
sijia.yi@convergence.finance

The Rockefeller Foundation has awarded a grant to Convergence to enhance local mobilization of private capital towards climate action in emerging economies in Southeast Asia.

The Rockefeller Foundation Awards Convergence a Grant

The Rockefeller Foundation Awards Convergence a Grant to Support Local Capital Mobilization for Climate Action in Southeast Asia

*Toronto, 30 October 2024* — Today, Convergence, the global network for blended finance, launches its flagship report [the State of Blended Finance 2024: Climate Edition](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view). 

The report finds that the climate blended finance market saw its highest ever annual financing total in 2023, growing by 120% to $18.3 billion in aggregate investment from $8 billion the year prior. 

What is notable is that this increase is coming from the private sector and commercial capital, as the amount of donor capital entering blended finance has stayed constant. The report finds that private sector investment into climate blended finance increased by almost 200% in 2023, in addition to a 60% increase in commercial financing from development finance institutions (DFIs) and multilateral development banks (MDBs). 

This was the first year Convergence published two State of Blended Finance reports, one in the spring focused on the entire blended finance market, and the current edition focused on climate. The decision to publish an annual climate edition was in response to investors’ increasing focus on climate and the urgent need for up-to-date data. 

“The last edition of the report published this spring found that annual blended finance volumes reached a five-year high of $23 billion,” says Ayesha Bery, Manager at Convergence and a lead author on the report. “Taken together, the findings from the two reports, as well as the presence on a number of very large transactions recently, signal to us that the blended finance market is maturing and that private investors, long reticent, are investing in these structures at volumes never before seen.” 

Among private sector investors, financial institutions have been the most consistently engaged in climate blended finance, investing $7.2 billion and $4.2 billion in renewable energy and energy efficiency/emissions reductions respectively in the last three years. The report finds that institutional investors have also played a bigger role in climate blended finance. Over the past three years, 60% of all blended finance deals involving institutional investors have focused on climate initiatives, with financing from institutional investors rebounding sharply to $870 million in 2023, following a significant decline in 2022 and several years of relative stagnation.

“After years of seeing blended finance, and climate blended finance more specifically, fall short of expectations, the findings from this report are heartening. It’s telling us the market is finally getting smarter, more efficient, and bolder with how it uses limited catalytic capital,” says Joan Larrea, CEO at Convergence. “However, we have lost time. Achieving major results will require maintaining this direction, but progressing at a much faster pace.” 

While it has been a landmark year for climate blended finance, gaps remain. Climate adaptation continues to be underfunded, lagging behind mitigation, and private sector participation in these projects remains limited. The report noted 32 adaptation blended finance transactions between 2021 and 2023, with a total value of $3.5 billion, compared to 132 blended finance transactions targeting climate mitigation for 2021 to 2023, with a total value of $26 billion.. 

However, the report finds opportunity to increase financing flows towards adaptation through cross-cutting transactions, which contain both climate adaptation and mitigation components. Convergence has captured 63 cross-cutting blended finance transactions between 2021 and 2023, with a total value of $10 billion. These transactions contain elements that may be more familiar and are seen as less risky to traditional investors. The report finds that the growing maturity of the mitigation market may provide opportunities for blended finance to shift into transactions that bring in elements of adaptation. 

The report also focuses on countries’ Nationally Determined Contributions (NDCs), which will be renegotiated in early 2025. At this critical juncture, the report reflects on the challenges to implementing the NDCs and explores how blended finance can support governments in developing economies to create investment plans that can better direct investors to where climate financing is most needed. The report includes case studies on how blended finance has been integrated within NDC implementation in Indonesia, Rwanda, and Belize. 

Analysis in the report draws from Convergence’s Historical Deals Database, the largest and most detailed database of historical blended finance transactions, comprising 1,233 blended finance transactions with a total investment of $231 billion.

Read the State of Blended Finance 2024: Climate Edition [here](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view). 

__About Convergence__ 
Convergence is the global network for blended finance. We exist to increase private investment in emerging markets and developing economies to advance the UN Sustainable Development Goals and Paris Agreement.

Our members include private investors looking to diversify their portfolios, businesses seeking capital, as well as public agencies and philanthropic foundations looking to make their funds go further.

__Media Contact__ 
Sijia Yi 
Head of Communications 
Convergence 
sijia.yi@convergence.finance

Climate blended finance market sees 120% increase driven by private sector, new report from Convergence finds

Convergence launches State of Blended Finance 2024: Climate

Rand Merchant Bank (RMB) is a leading African corporate and investment bank and part of FirstRand Limited, one of the largest financial services groups in Africa. RMB offers their clients innovative, value-added advisory, funding, trading, corporate banking, and principal investing solutions. RMB has a deal footprint in over 35 countries in Africa, as well as a presence in the UK, USA, India, and China. 

We spoke with Alessandro Scalco, Blended Finance Lead, at RMB about their blended finance strategies, how they measure impact, their future in the blended finance space, and more.

__What can you tell us about your approach to using blended finance?__

Although blended finance is an evolving concept in Africa, RMB is very familiar with its features, for example the blending of different risk types in a capital stack. We have identified blended finance as an important capability in delivering on our ambitions for shared prosperity in Africa. We believe that an African corporate and investment bank should be driving blended finance in the region to help find solutions and close developmental funding gaps in Africa.

RMB is currently working on several blended finance deals in South Africa. We are sector agnostic working across a variety of sectors, including healthcare, affordable housing, financial inclusion, and women-led businesses.

__Can you tell us about the partners you work with and any commonalities and differences between them?__

We work with a variety of partners, including local development finance institutions (DFIs), international DFIs, institutional investors, corporates, foundations, and other investor types. One of our focus areas is fostering relationships with local DFIs to work towards closing development financing gaps in Africa. Many of the foundations we’ve engaged with are reassessing their grant programs and are interested in using innovative finance structures to create more impact with their grants.

What is clear from our blended finance engagements is that across the spectrum of stakeholders both impact and financial return is critical. However, different stakeholders have different priorities. Grant and concessional funders prioritize impact, aiming to catalyze investors into transactions to make them bankable. While commercial investors are more focused on financial returns. However, regardless of the type of stakeholder, impact is an essential component of blended finance transactions. For us striking the right balance between both sides, impact and financial return, is critical. 

__Can you share an example of a successful transaction that has benefited from your blended finance approach?__

Blended finance is quite new to RMB in the sense that we haven't structured for the market, but I’ll tell you about a transaction where we were the social investor. 

In March 2023, RMB provided upfront funding as a social investor for the Imagine Social Impact Bond, an outcomes-based funding model aimed at improving the health outcomes of adolescent girls and young women in South Africa. The South African Medical Research Council (SAMRC), in its role as outcomes funder, made payments based on the achievement of pre-agreed impact outputs and proxy-outcomes. As the social investor, RMB only received a return on the upfront funding provided. The outcomes funder is only required to make a payment to the extent that the impact outputs and proxy-outcomes are achieved by the programme implementer, Networking AIDS Community of South Africa (NACOSA). NACOSA delivers a package of interventions targeting the prevention and management of HIV/AIDS and pregnancy within the target population. Outcomes achieved each quarter are verified by an Independent Verification Agent (IVA).

The implementation risk of the program is transferred to RMB and the efficiency of public health service funding is increased. In addition to defining a package of health services that improves health outcomes for adolescent girls and young women in 14 schools based in Moretele and Newcastle, the program seeks to test the funding model for scale to enable greater investment from the private sector and achieve both financial and social returns.

Our goal with this transaction was to deepen our understanding of blended finance. It was a key step in our journey towards establishing our blended finance capabilities and getting buy-in from relevant stakeholders, as well as a proof-of-concept that these transactions can work. After seeing the impact that the transaction had and is currently having, we decided that we are quite well suited to structure blended finance transactions and take them to market.

We're already talking to SAMRC, NACOSA, and other organizations about how we can support future funding in the space and structure for that market. 

__What are some ways that RMB measures and evaluates the success and impact of blended finance transactions?__

We currently have a pipeline of about five transactions across healthcare, student accommodation, affordable housing, financial inclusion, and conservation. Measurement and evaluation of success is different for each transaction. The critical first hurdle for us in any transaction is what is the impact? That's always the first question we ask. Then, what is the commercial investor trying to get out of this? What is the return or the impact that they're trying to get and how can we get that right for them? The second aspect is looking at the implementer or the beneficiary of the transaction. What's critical is that there is a measurable outcome, a tangible impact resulting from the measures implemented. Another important element of measuring success for us is ensuring that there's a stretch element to the impact. We want to push the institution or the beneficiary to drive impact and go above and beyond what they might normally do, while still being sustainable and achievable.

In a market like Africa and South Africa you also need to be careful in striking that balance, because if you go too far many projects will fail from an impact perspective, which could lead to the perception that blended finance is ineffective. However, on the other hand if you choose easy targets, you could get criticism that transactions are not impactful enough.

We measure our success and impact by looking at the replicability, scalability, and additionality of each transaction. For example, if we are looking at an outcomes-based funding structure in the conservation space, success for us would be: 
i. creating a transaction that results in the conservation project securing the required funding to achieve scientifically tested and agreed upon success metrics 
ii. crowding in commercial investors to take on the implementation risk (but with the potential to outperform if successful) 
iii. developing the market for these types of instruments, thereby crowding new capital into conservation and shifting the way traditional grant/donation funding is channeled into these projects.

__As a corporate and investment bank, what are some unexpected challenges or opportunities you’ve experienced navigating blended finance transactions?__

Blended finance is still new to the market and a lot of energy is expended on explaining what it is. There is also the risk that some of the deals are too highly structured or complicated and will not be replicated or taken up by traditional investors (i.e. investors other than DFIs or impact focused investors). Access to deals seems to be a common theme in this space right now. This doesn’t mean there aren’t companies who need the capital, we just haven't bridged the gaps to provide funding to those businesses yet. 

The opportunity for us as a bank is to explore how we can close those gaps and create more bankable deals. We are in a good position as RMB to close this gap in that we have a variety of capabilities and skills at our disposal. Additionally, the brand backing goes a long way in legitimizing the importance of blended finance in Africa. 

The struggle we have as a bank is getting the deal size right. We acknowledge that we'll need to look at deals that are not our usual deal size, so we can build our blended finance capabilities. Too often the knee jerk reaction in Africa is to use a debt structure because it's more palatable to investors, but there is a need to use more patient capital. That's something we need to navigate.

__How does RMB apply a gender lens?__

We haven’t reached the maturity yet where we can say we specifically apply a gender lens on investments, but we look at it on a deal-by-deal basis.

The issue facing the South African market now is that there is a lack of investable deals, this is not to say there is a lack of businesses looking to be funded, but rather the traditional sources of funding (i.e. banks) won’t fund early-stage businesses, and if those businesses do find alternative funding, it will often be at a rate that will likely cripple them. It is important that we use blended finance to bridge this gap and create an enabling environment that will result in businesses, particularly those led by women and youth, being able to access patient and enabling capital to support them so they can grow and prosper. 

That’s the key here, by creating a universe in which you can do that you will then be able to apply a gender lens and a youth lens and fund the space more actively because people will feel confident that there is access to finance.

__How do you see RMB’s blended finance activities evolving in the future?__

At RMB we like to stay one step ahead of the market, but also one step abreast with the market. Evolution will be led by the demand in the developmental space. Climate and just transition are the focus right now, but that space is starting to get crowded. We need to identify the next developmental focus area and determine the funding nuances in that space. Healthcare, affordable housing, and water in particular, are becoming very topical on the African continent. It is going to be an evolving space and each of these sectors will have different funding needs. 

More patient capital will be required going forward, so I suspect we will see more “equity like” capital instruments (i.e. convertibles being introduced to bridge the gap between the needs of the market and the developmental funding need). I also believe the use of guarantees will become more prominent as a tool in blended finance, especially to catalyze investments into early-stage projects where the risks are higher or perceived to be higher. Blended finance is going to become more mainstream in Africa, however I would caution that we often overcomplicate blended finance, we structure the structure too much and that crowds out the market. We need to create structures that are replicable, scalable, and simple enough that investors can be comfortable and allocate capital to them.

Learn about Rand Merchant Bank's blended finance strategies, how they measure impact, their future in the blended finance space, and more.