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__Member Training: How Philanthropic Organizations Blend, January 9, 2025__

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More details to come.

Member Training: How Philanthropic Organizations Blend

Join us as we explore how philanthropic organizations blend

How Philanthropic Organizations Blend

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

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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

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

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

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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

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

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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

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__

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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. It will examine how adaptation solutions can become more investable and how countries are financing Nationally Determined Contributions (NDCs) across the region.

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

__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)

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

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__

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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.

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__Masterclass: An Introduction to Blended Finance for Nature Based Solutions, November 14, 2024, 9:00AM - 10:00AM ET__

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Interested in innovative financing for nature-based solutions? Join Latimpacto and Convergence for an engaging masterclass designed to demystify blended finance in the environmental context. Explore how public and private resources can work together to drive sustainable impact and gain insights from industry experts.

Masterclass: An Introduction to Blended Finance for Nature Based Solutions

Join us to learn about blended finance for nature-based solutions.

Blended Finance for Nature Based Solutions

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__Tuesday, November 5, 2024, 6:00PM - 8:30PM EAT, Nairobi, Kenya__

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The High Commission of Canada in Kenya, Convergence, and Renew Capital are hosting an invite-only networking event during the AVPA Conference in Nairobi.

The 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/institutions engaged in blended finance, make new contacts, exchange ideas, and more.

*Registration is open on a first come, first served basis.*

Member Networking in Nairobi

Join us for a member networking reception in Nairobi, Kenya.

Member Networking Reception in Nairobi

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Join us virtually for the launch of the 9th edition of our flagship State of Blended Finance report on __Wednesday, October 30 at 9:00AM ET__, where we will share data, trends, insights, and recommendations from the report.

This year, for the first time, we are releasing two State of Blended Finance reports. This second report, with a focus on climate, complements our 2024 State of Blended Finance which covered the overall blended finance market and was released earlier this year.

Explore the 2024 State of Blended Finance [here](https://www.convergence.finance/resource/state-of-blended-finance-2024/view).

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Detailed agenda to follow.

2024 State of Blended Finance (Climate Edition) Virtual Launch

Convergence is launching the State of Blended Finance (Climate Edition) on Wednesday, October 30 at 9:00AM ET. This year, for the first time, we are releasing two State of Blended Finance reports. This second report, with a focus on climate, complements our 2024 State of Blended Finance which covered the overall blended finance market and was released earlier this year.

2024 State of Blended Finance (Climate Edition) Launch

giin networking oct24 v2

__Tuesday, October 22, 2024, 7:00PM - 8:30PM CET, Amsterdam, Netherlands__

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Convergence invites you to our member networking reception on the sidelines of the GIIN Investor Forum in Amsterdam. Chat with other Convergence members, including impact investors, institutional investors, donors, development banks, and sponsors of blended finance deals. Convergence will present the latest trends in blended finance, and members will have ample time to exchange ideas and discuss blended finance initiatives. Snacks and drinks will be served. 

*Registration for this event is now closed. Please contact regina.rossmann@convergence.finance with any questions.*

Member Networking at the GIIN Investor Forum

Join us for a member networking reception in Amsterdam, Netherlands.

Member Networking Reception in Amsterdam

acs oct24 web banner

__Tuesday, October 22nd, 2024, from 9:00 am-10:00am ET__

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We invite you to join us virtually for an information session on the [Asia Climate Solutions (ACS) Design Grant](https://www.convergence.finance/design-funding/open-window/Asia-climate-solutions-design-grant). The ACS Design Grant awards feasibility study and proof-of-concept grants for the design and launch of innovative blended finance solutions that mobilize private capital to sectors critical for climate transition and resilience in developing markets in Asia including nature-based solutions (NbS), clean energy transition, and sustainable cities and infrastructure.

The current cycle has a thematic focus on sustainable agriculture and clean energy solutions, with an emphasis on supporting innovative models that leverage blended finance to mobilize local public, private, and philanthropic capital to support vulnerable communities in key Southeast Asian markets such as Indonesia, the Philippines, and Vietnam. __*Applicants are encouraged to submit solutions that align with the thematic focus or the broader program criteria*.__

Register for the webinar to:
- Learn more about Convergence’s Design Funding Program and the ACS Design Grant
- Hear from one of our grantees about their design funding experience and understand how blended finance can help mobilize local private sector investment
- Gain insight into how to apply, grant eligibility, and evaluation criteria
- Get your questions answered, and more!

The anchor donors of this initiative include the Monetary Authority of Singapore, Department of Foreign Affairs and Trade Australia, Olayan Group, UBS Optimus Foundation, and Rockefeller Foundation.

The ACS Design Grant is now open, and the deadline to submit concept notes is __November 22, 2024__. Visit the [ACS Design Grant page](https://www.convergence.finance/design-funding/open-window/Asia-climate-solutions-design-grant) to learn more and apply.


Asia Climate Solutions Design Grant: Information Session (Europe/East Coast)

Join us virtually to gain insight into the application process for the Asia Climate Solutions Design Grant

Learn about the Asia Climate Solutions Design Grant

__Tuesday, October 22nd, 2024, from 9:00 am-10:00am SGT__

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We invite you to join us virtually for an information session on the [Asia Climate Solutions (ACS) Design Grant](https://www.convergence.finance/design-funding/open-window/Asia-climate-solutions-design-grant). The ACS Design Grant awards feasibility study and proof-of-concept grants for the design and launch of innovative blended finance solutions that mobilize private capital to sectors critical for climate transition and resilience in developing markets in Asia including nature-based solutions (NbS), clean energy transition, and sustainable cities and infrastructure.

The current cycle has a thematic focus on sustainable agriculture and clean energy solutions, with an emphasis on supporting innovative models that leverage blended finance to mobilize local public, private, and philanthropic capital to support vulnerable communities in key Southeast Asian markets such as Indonesia, the Philippines, and Vietnam. __*Applicants are encouraged to submit solutions that align with the thematic focus or the broader program criteria*.__

Register for the webinar to:
- Learn more about Convergence’s Design Funding Program and the ACS Design Grant
- Hear from one of our grantees about their design funding experience and understand how blended finance can help mobilize local private sector investment
- Gain insight into how to apply, grant eligibility, and evaluation criteria
- Get your questions answered, and more!

The anchor donors of this initiative include the Monetary Authority of Singapore, Department of Foreign Affairs and Trade Australia, Olayan Group, UBS Optimus Foundation, and Rockefeller Foundation.

The ACS Design Grant is now open, and the deadline to submit concept notes is __November 22, 2024__. Visit the [ACS Design Grant page](https://www.convergence.finance/design-funding/open-window/Asia-climate-solutions-design-grant) to learn more and apply.


Asia Climate Solutions Design Grant: Info Session (Asia/West Coast)

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. 

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.

Rand Merchant Bank Member Spotlight

Rand Merchant Bank Member Spotlight with Alessandro Scalco

This year [Climate Week New York](https://www.climateweeknyc.org/) will take place from September 22-27. Convergence will be an active participant, attending and contributing to several events related to blended finance and mobilizing capital for climate action. Read on to find out which events we’ll be part of.

Be sure to follow us on [Twitter](https://twitter.com/ConvergenceBF) and [LinkedIn](https://www.linkedin.com/company/convergenceblendedfinance/) to stay up to date with our activities at Climate Week.

__Convergence Delegation:__

[Joan Larrea](https://www.convergence.finance/about/team/GFACYZSAIE8qmmCKA8ywc), CEO

[Leah Pedersen](https://www.convergence.finance/about/team/1kS1ajAc1LUMVV4hriluTk), Senior Director, Market Acceleration and Design Innovation 

[Nnamdi Igbokwe, Ph.D.](https://www.convergence.finance/about/team/5jC79jvyo64BN1bsT2LA9k), Director, Knowledge and Thought Leadership

[Trang Vandelis](https://www.convergence.finance/about/team/krYvaWs2vQWU4u0C0quAO), Associate Director, Design Funding and Market Acceleration

[Andrew Apampa, CFA](https://www.convergence.finance/about/team/6vagDS0aL4cusKnOrWB6o), Manager, Content

[Ayesha Bery,](https://www.convergence.finance/about/team/3u0qeg7AKQCWmoY2QwG0s4) Manager, Content

[Nick Zelenczuk](https://www.convergence.finance/about/team/5qIV45tERJOL0ffxaqta3e), Manager, Content

[Kanwal Rathi, CFA](https://www.convergence.finance/about/team/6YaT2mRlnWCuTraU18DLk5), Senior Associate, Design Funding and Market Acceleration

[Robin Ivory](https://www.convergence.finance/about/team/5Oui37koFSY0v588c2aoBD), Senior Associate, Content

__Events__

| Date & time (GST)      | Event title   | Organizer     |
| ----------  | ---------- | ---------- |
| Sep 23, 8:30AM-10AM      | [Convergence Member Breakfast and Networking](https://www.convergence.finance/calendar/5s42tuFHH46nZMQdQCEZAX/view)     | Convergence  |
| Sep 23 | [How Investors Are Addressing the Climate Emergency](https://web.cvent.com/event/099266ad-f3ac-4d1a-81ea-9248eb90f14f/websitePage:28275658-8aa2-4dff-bd44-7b7463b818bb?RefId=Climate%20Week%20NYC%202024)    | ClimateTech IQ      |
| Sep 23, 11AM-3PM | Unlocking Nature Finance in the Global South: Policy Strategies, Barriers, and Capital Flow Challenges | Pakistan Environment Trust    |
| Sep 23, 1:05PM-1:35PM | Blended Finance as a Danish Strategy for Creating Impact and Return on a Greater Scale  | Danish Consulate    |
| Sep 23, 11AM-3PM | Blended Finance in Healthcare  | Devex, Vodafone Foundation, and MSD for Mothers       |
| Sep 23, 6PM  | Blended Finance as a Danish Strategy for Creating Impact and Return on a Greater Scale     | Danish Consulate    |
| Sep 23, 3PM-7PM     | De-Risking Our Future: a Howden and Microsoft Event - Climate Week NYC   | Howden & Microsoft       |
| Sep 23, 4:30PM-6:30PM       | Climate Gender Roundtable  | Convergence and Natixis IM    |
| Sep 23, 7PM-10PM  | Humanity Insured Private Dinner    | Humanity Insured    |
| Sep 24, 9AM-5:30PM   | Day Two of The Nature Hub @ Climate Week New York City 2024  | The Nature Hub|
| Sep 24, 8AM-1PM | Mobilizing Funds and Financial Instruments for the Green Economy| AYA earth Partners  |
| Sep 24, 9AM-10AM | Enabling NCS Investment: policy barriers and solutions| Forest Investor Club (FIC)|
| Sep 24, 1PM-2:30PM| FAST-Infra Label: Mobilizing the Private Sector for Sustainable Infrastructure | Global Infrastructure Basel, FAST-Infra, Bloomberg |
| Sep 24, 2:30PM-7PM   | Financing the Transition | Morningstar Analytics |
| Sep 24, 3:30PM-5PM      | Beyond the Horizon-Innovative Financing for Food Security | AVPN |
| Sep 24, 3:30PM-5PM      | Forest Investor Club Member Meeting |  Forest Investor Club (FIC), World Business Council for Sustainable Development (WBCSD) |
| Sep 24, 3:30PM-9PM  | Climate Leaders' Assembly: The New Chapter for Climate Action |  National Climate Change Secretariat of Singapore |
| Sep 24, 3:30PM-5PM   | First-of-a-kind (FOAK) finance |  Standard Chartered |
| Sep 24, 5PM-6PM     | Climate Adaptation and Resilience Investment Solutions Roundtable | Bechtel |
| Sep 24, 6:30PM-8:30PM | Collaborative Event w/ SDG Impact Finance Initiative (SIFI) |  Convergence and SIFI |
| Sep 24, 5:30PM-7:30PM   | Standard Chartered: Leaders in Carbon Reception| Standard Chartered |
| Sep 24, 2PM-6PM | NYCW Climate DealRoom| MUFG, Green Guarantee Company, and Institutional Investors Group on Climate Change  |
| Sep 24, 5:30PM-7:30PM     | 2X Investor Meetup| 2X Global |
| Sep 24, 10AM-12PM  | NDC Investment Summit SMIAC Investable Asset Classes Working Group GEMs3.0 Investor and Philanthropy Consultation| Sustainable Markets Initiative |
| Sep 24, 10AM-12PM| Facilitated discussions on Maximising benefits: practical advice for investing in and procuring Nature-based Solutions| Nature Hub |
| Sep 24, 1:30PM-5:30PM | Africa Investment Forum| AOS: Africa Investment Forum |
| Sep 25, 8AM-10AM   | Closing Brazil’s Climate Finance Gap| Climate Advisors |
| Sep 25, 8:30AM-11AM | Catalyzing Climate and Nature Solutions: The Role of Public, Private Philanthropic and Academic Collaborations in Blended Finance| Columbia U, WEF GAEA, et al |
| Sep 25, 8:30AM-6:30PM  | Inaugural SIRI Blended Finance Conference| SIPA Columbia University |
| Sep 25, 1PM-2PM  | Investing in Naure-based projects: managing the risks | FIC|
| Sep 25, 12PM-2PM  | NIEES Private Roundtable "Barriers and Opportunities for Financing Global South Energy Transitions| Duke University|
| Sep 25, 12PM-2PM | NYCW Global Capacity Building Coalition Lunch & Launch Event| Global Capacity Building Coalition (GCBC)|
| Sep 25, 2PM-5PM| High-Level Roundtable on Private Sector Engagement for NDCs 3.0| NDCs Partnership|
| Sep 25, 4PM-6PM   | From Patagonia to the Caribbean: Seizing the Climate Market Opportunity in LatAm | Reciprocal Studio|
| Sep 25, 8AM-11AM | Accelerating Global Connectivity and Progress Toward the SDG | Rockefeller Center| FP |
| Sep 25, 1PM-5:30PM | S&P Global Sustainable| Javits Center | S&P |
| Sep 26, 8AM-9:30AM | No Smallholders Left Behind: Empowering livelihoods & action through climate finance| Climate Action for Smallholders (CASH) Coalition |
| Sep 26, 1:30PM-3:30PM  | Girls First Finance Reception| Girls First Finance |
| Sep 26, 3:30PM-5:30PM   | Financing the ‘Just’ in Just Transition| Boston Consulting Group, World Business Council for Sustainable Development & Council for Inclusive Capitalism |
| Sep 26, 3:30PM-5:30PM| The People-Centric Energy Transition in Asia Pacific: The Now, The How, & The Future | AVPN and Boston Consulting Group|
| Sep 26    | Lab Endorsement Meeting and 10th Anniversary Summit  | Climate Policy Initiative (CPI)|
| Sep 26, 9AM-5PM | CLEM (Clean Energy Mechanism) - Making Clean Energy Transitions Profitable | Sustainability Economics|
| Sep 26, 4:30PM-6:30PM | Funding Collaborative Solutions on Climate Adaptation| Latimpacto, Trafigura Foundation and Dalberg |
| Sep 26, 9AM-12PM  | Catalytic Climate Capital Forum | RMI |
| Sep 27, 6PM-8PM | IMPACT EUROPE (formerly EVPA) - Member Event | IMPACT EUROPE (formerly EVPA) |
| Sep 27, 6PM-8PM | AVPN Members' Reception | AVPN, Impact Europe, Latimpacto, AVPA |

Convergence at Climate Week New York City

San Francisco and Toronto, September 19, 2024 — The Catalytic Climate Finance Facility (CC Facility) is announcing the opening of a new application round for high-impact, scalable blended financial structures in developing economies. These structures should have already demonstrated market traction and be poised for significant growth. [Applications must be submitted through the CC Facility website from September 19 to October 24, 2024.](https://www.ccfacility.org/apply)

The CC Facility offers up to USD 500,000 in grant funding, tailored technical assistance, and access to knowledge-sharing resources through a Learning Hub to help promising blended finance structures scale their impact. It offers targeted support in strategy, fundraising, and operations, with a focus on overcoming market barriers to mobilize private capital for climate action.

In addition, the program helps refine approaches to gender mainstreaming, impact measurement and management, and local capacity development while building effective operational and governance systems. The ultimate goal is to empower blended finance structures to drive business success, attract funding through targeted outreach, and accelerate their scale-up.

[A webinar outlining the program’s offerings is scheduled for October 9, 2024.](https://climatepolicyinitiative.zoom.us/webinar/register/9117238401121/WN_teIzEvO6R9m3sYm4-EfQhA)

“The CC Facility is committed to accelerating the flow of private capital into climate solutions,” said Joan Larrea, CEO of Convergence. “By providing targeted support and resources, we aim to empower innovative blended finance structures to overcome barriers and achieve significant scale.”

Dr. Barbara Buchner, Global Managing Director of Climate Policy Initiative (CPI), added, “We are seeking high-potential climate finance vehicles that have demonstrated market traction and are ready to expand their impact. Our program is designed to equip these solutions with the tools and expertise needed to attract investors and drive positive change.”

__ABOUT THE CATALYTIC CLIMATE FINANCE FACILITY__

The Catalytic Climate Finance Facility (CC Facility) is a solution to scale climate finance by filling a market gap in mobilizing private capital. The CC Facility provides a suite of acceleration services to market-ready blended finance vehicles in developing economies to help them reach scale. Through grant funding, technical support, and a learning hub, the CC Facility accelerates the implementation of high-impact financial structures, while providing resources to the broader ecosystem on how to best catalyze climate finance. The initiative is a partnership between [Climate Policy Initiative (CPI)](https://www.climatepolicyinitiative.org/) and [Convergence](https://www.convergence.finance/).

__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 

__Sam Goodman__ 
Communications Associate 
Climate Policy Initiative 
sam.goodman@cpiglobal.org

CC Facility opens new round of applications, deadline October 24

CC Facility opens new round of applications, deadline Oct 24

*Toronto, 11 September, 2024* — Convergence awarded a proof-of-concept grant to Mekong Capital for its impact initiative, Mekong Earth Regeneration Fund (MERF). MERF is a USD 200 million blended finance vehicle that will provide growth-stage private equity funding focused on regenerative agriculture and sustainable land use business models in the Lower Mekong region. This grant is awarded through Convergence’s [Asia Climate Solutions (ACS) Design Grant](https://www.convergence.finance/design-funding/open-window/Asia-climate-solutions-design-grant).

The majority of the local population in the Lower Mekong region is dependent on agriculture and rural farming, making them severely and disproportionately affected by climate change. Over the past decades, changing agricultural land use practices have led to increased exposure to climate hazards and increased GHG emissions from the agriculture, forestry, and land-use sectors. Meanwhile, private investments in the local sustainable agriculture and forestry sectors remain low and mainly take the form of debt, which is unsuitable for many businesses looking for patient long-term equity financing to support them in adopting more sustainable agricultural practices. 

This initiative seeks to leverage Mekong Capital’s significant experience to address the gap of undersupplied equity funding in the region and support the expansion of impactful agri-businesses. In addition, MERF intends to provide hands-on support to investee companies through a complementary technical assistance facility that will help expand the operational capacity and impact for these companies.

MERF aims to cultivate a thriving, biodiverse ecosystem in the Lower Mekong region focusing on Cambodia, Laos, and Vietnam through sustainable land use, nature-based solutions, and regenerative farming practices. Together with climate mitigation benefits, it aims to provide significant co-benefits of improved livelihoods, climate adaptation, and enhanced resilience of farmers, and protection of biodiversity. The long-term objective is to improve the livelihoods of at least 1 million beneficiaries, regenerate at least 200,000 ha of forest, agricultural, and coastal land and contribute to over 10 million tonnes of CO2e emission reductions.

MERF received funding from the Dutch Fund for Climate and Development (DFCD)’s Origination Facility for its initial design and to complete the feasibility study. This proof-of-concept grant from the ACS Design Grant will help Mekong Capital complete the final design of MERF, as well as the technical assistance facility and mobilize more sources of capital. 

“Mekong Capital and Convergence’s partnership will accelerate the mobilization of much-needed capital for climate adaptation and mitigation, while supporting farmers in the Lower Mekong region. Mekong Capital aims to lead the way in private sector investment and engagement in regenerative agriculture,” said Ellen Van, Mekong Capital Principal. “By leveraging blended capital to help private companies scale regenerative practices that replenish our natural assets and improve the lives of our farmers, MERF seeks to demonstrate that sustainable financial return and impact can co-exist.

"Mekong Capital’s Mekong Earth Regeneration Fund was selected due to its high potential for development impact, replicability in other sectors and geographies, and the team’s strong track record of engagement and regional presence," said Leah Pedersen, Convergence Senior Director, Market Acceleration and Design Innovation. “MERF is also a prime example of the field-building power of our funding. Through our grant, Mekong Capital, a mainstream private equity fund manager, will strive to enter the climate finance space for the first time.”

The ACS Design Grant targets critical climate mitigation and adaptation sectors in Asia including nature-based solutions, clean energy transition, and sustainable cities and infrastructure. It provides feasibility study and proof-of concept grants for innovative, high-impact and investible solutions using blended capital structures.

The ACS Design Grant is funded by four anchor donors: the Department of Foreign Affairs and Trade Australia, the Monetary Authority of Singapore, The Olayan Group, and UBS Optimus Foundation.

__About Mekong Capital__ 
Established in 2001, Mekong Capital is a private equity firm specializing in consumer-driven businesses. Mekong Capital’s investee companies are often among the fastest-growing and market-leading in Vietnam’s consumer sectors. Mekong Capital has completed 43 investments, with 28 fully exited, and currently advises two active funds. Mekong Capital provides proactive support to its investee companies to drive sustainable growth.

__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 tool providing early-stage capital to support blended finance solutions in frontier markets and nascent sectors to accelerate the number of investible transactions in the market targeting SDGs.

__Media Contact__ 
__Sijia Yi__ 
Head of Communications 
Convergence 
sijia.yi@convergence.finance

Convergence awarded a proof-of-concept grant to to Mekong Capital for its impact initiative, Mekong Earth Regeneration Fund (MERF)

Convergence awards proof-of-concept grant to Mekong Capital

Convergence awards grant to support Regenerative Agriculture and Sustainable Forestry in the Lower Mekong Region

*This op-ed was originally published in [Next Billion](https://nextbillion.net/regulatory-roadblocks-holding-blended-finance-back-three-solutions/).*

After hitting a [10-year low](https://www.convergence.finance/resource/state-of-blended-finance-2023/view) in financing flows in 2022, [Convergence data shows](https://www.convergence.finance/resource/state-of-blended-finance-2024/view) that blended finance bounced back to a five-year high of $15 billion in 2023. Helped in part by multilateral development banks and development finance institutions [investing in greater sums in 2023](https://www.convergence.finance/resource/state-of-blended-finance-2024/view), several large-scale blended transactions came to market in close succession over the course of that year. One of these “whales” was the [SDG Loan Fund](https://www.convergence.finance/resource/SDG-Loan-Fund/view), a $1.11 billion investment vehicle, devised by Allianz Global Investors and the Dutch Entrepreneurial Development Bank and backed by the John D. and Catherine T. MacArthur Foundation, that looks to draw more institutional investors to climate, agriculture and financial services investments in emerging markets.

Despite this positive turn, several foundational questions facing blended finance remain unanswered. For instance, how can donor governments worldwide develop and adopt a coherent private sector mobilization strategy to tackle the SDG financing gap, one result of which would be greater support for blended finance? How can developing country governments play a bigger part in this process as donors, while helping to catalyze domestic institutional capital that remains [largely untapped](https://www.convergence.finance/resource/the-state-of-blended-finance-2021/view) when it comes to financing SDG investments? How can more standardized and simplified vehicles be developed to appeal to private sector investors? And how can greater transparency on blended finance transactions be encouraged?

These pivotal questions presuppose that highly regulated financial institutions like commercial banks and insurance companies can be seamlessly mobilized for development projects in emerging markets and developing economies (EMDEs). But they overlook a critical obstacle: the complex web of policies and regulations governing these institutions that deter them from investing or lending in EMDEs.

As blended finance looks to build upon its renewed momentum, it becomes more essential for the industry to address and overcome the regulatory roadblocks that hinder its ability to scale. Below, I’ll discuss these obstacles and some promising solutions, as outlined in [Convergence’s State of Blended Finance 2024 report](https://www.convergence.finance/resource/state-of-blended-finance-2024/view).

__Understanding the regulatory roadblocks to private investment in EMDEs__

There are several common regulatory roadblocks that make it difficult for private financial institutions and investors to invest or lend in EMDEs. Firstly, the mandates of many investors limit their ability to invest in developing economies. The [median sovereign risk rating in the 142 EMDEs](https://www.convergence.finance/api/file/e0a4c9f803514197dbe7d72b583fbed7:fcec65227ea9fc8124b1f31a9fee9c014f2660a8992b54fc55c13af2f6e4424ea29df8c01c0636f09ee2f01524478507d01785e66c9886c5b1bcdc643dbd58ba9d636fe64095c9227722da76116f2d56994eec2dc20a689dd663695617e9a122ae789737b6c8b508fd6281401a0c51748b38533bf668c4d9747963a5d6bd742330de9d965f39091d093cdd34d0ab900f) is “B-”, which is considered sub-investment grade, so most developing countries do not align with the criteria of many investors. Additionally, highly-regulated financial institutions like commercial banks and insurance companies are required by international standard setters to hold more capital in reserve for riskier assets. In some cases, these institutions must cap the investment amounts held in certain types of assets (particularly those below investment grade). This poses a challenge to investing in the developing market assets supported by blended finance, many of which lack official rating methodologies and thus assume the credit rating of the country in which they’re domiciled (i.e., the sovereign ceiling).

Secondly, under the Basel IV international banking reforms, standardized metrics have replaced the proprietary models formerly used by commercial banks when weighting their financial assets by their level of risk, to determine the amount of regulatory capital they must hold in reserve. This means that commercial banks may no longer be able to lower their risk-weighted assets (and the amount of regulatory capital they must hold in reserve) by independently rating an investment in the senior tranche of a blended finance vehicle as lower risk, to reflect the protection they receive from investors in the first-loss tranche who bear the initial losses on the fund’s investments. Commercial banks are typically only willing to make senior tranche investments, so without this rating flexibility, they may be further disincentivized from investing in blended finance vehicles as a stepping stone to investing in EMDE transactions with acceptable risk/return ratios.

Further, international regulators lack adequate access to accurate information on default and recovery rates in developing markets. This means that the ratings given to projects and institutions domiciled in developing markets (which support the risk weightings commercial banks use to calculate their regulatory capital requirements) may not accurately reflect the reality of investing in these markets.

Convergence’s [State of Blended Finance 2024 report](https://www.convergence.finance/resource/state-of-blended-finance-2024/view) represents the first time we’ve explored these issues in detail. In the report, we analyze some of the key regulations affecting whether and how private sector investors can structure and/or invest in blended finance vehicles as a means to increase their ability to participate and invest in EMDEs more broadly. This analysis dovetails with reports published by other organizations, with one [study from the Global Alliance of Impact Lawyers](https://gailnet.org/unlocking-legal-pathways-for-blended-finance/), for example, also discussing the legal and regulatory barriers to blended finance, and another [paper from the Overseas Development Institute](https://odi.org/en/publications/trillions-or-billions-reassessing-the-potential-for-european-institutional-investment-in-emerging-markets-and-developing-economies/) exploring how changes across Europe in national and EU investment regulations and financial market conditions might impact the contribution of European pension funds and insurance companies toward the investment needs of EMDEs.

__Three ways to address the regulatory hurdles facing private investment in EMDEs__

Given the impact these regulatory hurdles have on blended finance’s mobilization potential, what concrete steps can be taken to address them? We’ve identified three key action points:

Firstly, practitioners should adopt a multi-stakeholder approach to building mutual understanding on blended finance across the blended finance and regulatory communities. To that end, they should create a formal framework that provides policymakers and regulators with a starting point on how to approach blended finance, while also establishing multi-stakeholder platforms to encourage dialogue. Regulators need to be consulted early in blended transactions, and they must become more educated on the practice and scope of blended finance through indicative case studies of what worked and didn’t work. Ultimately, they must also coordinate with each other where necessary to address common barriers and obstacles, while protecting the integrity of the financial system. In so doing, supervisors should explore ways that their regulatory systems can be updated to cater to innovative finance, specifically blended finance.

The creation of domestic multi-stakeholder platforms encouraging dialogue and the sharing of learnings between the public, private and regulatory communities can help advance these efforts. One example of this kind of platform is the [Joint Committee on Climate Change](https://www.jc3malaysia.com/), established in 2019, which is a regulator-industry platform working collaboratively to build climate resilience within the Malaysian financial sector. These platforms should also have a dedicated dialogue on blended finance, to encourage momentum on bringing diverse stakeholders together in areas where the need for more blended activity has been recognized.

Secondly, supranational forums like the G7 or G20 should be used as the space for a policy dialogue between donors and regulators on capital allocation rules for blended finance, with donors and institutional investors partnering to better calibrate concessional tools to existing regulations. Supranational forums should facilitate peer-to-peer learning between countries on the experience and practice of blended finance through a formal knowledge exchange within their working groups on sustainable finance. Any learnings from these efforts can inform the forums’ policy decisions on any regulatory issues related to blended finance, and can ultimately feed through to standard setting bodies.

Finally, practitioners should prioritize data transparency, to showcase the actual risk of investing in developing markets to regulators and institutional investors. Development finance institutions and multilateral development banks could support the mobilization of private investors by sharing the payment track records of their portfolios more extensively. Such data is consolidated in the database maintained by the [Global Emerging Markets (GEMs) Risk Database Consortium](https://www.gemsriskdatabase.org/), and its release would illustrate that well-structured project finance in developing economies is not as risky as regulators and investors may assume. A first step was taken toward providing this information in March 2024, with the publication of a [GEMS report](https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=28082) showcasing aggregate data on the recovery rates of investments with private and sub-sovereign borrowers in EMDEs. However, the report does not give the level of granularity that rating agencies or private investors need to inform their models and revise current capital allocation rules. With access to a more comprehensive data set, rating agencies could be more actively involved in rating blended funds and instruments to better reflect the credit enhancement benefits from first loss and/or junior tranche investors. This could enable regulators to consider reducing the risk weights for senior investor positions in structures protected by first loss, thereby helping to draw more large institutional investors into the market.

With the market for blended finance rebounding, and the urgency of scaling financing toward the SDGs only heightening as we approach 2030, practitioners must get creative in understanding the roadblocks that private investors face when investing in developing markets — and finding new ways to address them. The measures discussed above would go a long way toward creating an environment where large private investors can ramp up their involvement in blended finance, and in the markets where this capital is most needed.

Learn about three ways to address the regulatory roadblocks preventing blended finance from scaling

Regulatory Roadblocks are Holding Blended Finance Back

Opinion: Regulatory Roadblocks are Holding Blended Finance Back

ResponsAbility is an impact asset manager. Since 2003, they have invested over $15 billion in impactful projects and currently manage $5 billion in assets divided into three investment themes: climate finance, financial inclusion, and sustainable food. Beyond these three core themes they also offer tailor-made and Fund of Funds investment solutions, totaling at $1 billion. 

Blended finance makes up a significant portion of their portfolio. Structured blended finance debt strategies account for over $1.3 billion of responsAbility's assets under management, a figure that’s expected to grow rapidly, especially in climate finance. Two new structured blended finance debt strategies have been launched recently: the Climate Smart Agriculture and Food Systems strategy in March 2023 and the Asia Climate Strategy in November 2023.

We spoke with Henk Nijland, Head Business Development, DFIs & Public Investors, at responsAbility, about their blended finance strategies, how they measure impact, their acquisition by M&G plc., and more.

__Can you tell me about your background and experience in blended finance?__

Blended finance has been a central theme throughout my career. I began my professional journey at the Dutch Ministry of Economic Affairs, where I worked on promoting investments from Dutch companies in Eastern Europe. These investments often required de-risking through subsidies and political risk insurance – what we now recognize as blended finance, even though the term wasn’t in use at the time. 

I later spent 20 years at FMO, the Dutch Development Bank, where I held roles as a banker and head of investment teams focused on financial inclusion, infrastructure, and renewable energy. FMO is well-known in the blended finance arena. I was involved in 2014 with a Climate strategy, which provides green lines to financial institutions and direct lending for smaller project finance transactions. This strategy is managed by responsAbility. FMO’s $20 million investment in the strategy, alongside other notable investors like KfW and IFC1, was a key milestone. Today, the strategy has grown to around $613 million, demonstrating the long-term impact and scalability of blended finance.

1. [Project detail - GLOBAL CLIMATE PARTNERSHIP](https://www.fmo.nl/project-detail/33148)

__Can you tell me more about the Asia Climate Strategy and responsAbility’s role?__

In November 2023, we launched the Asia Climate Strategy, which targets corporates in Asia that operate in sectors with high CO2 reduction potential, including renewable energy, energy efficiency, e-mobility, and circular economy. A cornerstone of this strategy is our innovative "Climate Impact Assessment and Monitoring Framework", which ensures transparency and aims to achieve direct CO2 savings of an estimated 16 million tons2 over the lifetime of the investments. 

KfW, the anchor investor in the junior tranche3, and FMO, in the senior tranche4, play critical roles in this strategy. Additionally, a German family office invested in the senior tranche. In the strategy’s second closing in August 2024, M&G plc’s Life business invested $100 million5, bringing the strategy’s size to over $200 million. This example highlights how blended finance can effectively mobilize private sector capital at scale.

2. Calculations based on USD 500 million strategy
3. [Boost for the transformation in Asia: KfW supports mobilisation of private capital with the responsAbility Asia Climate](https://www.kfw.de/About-KfW/Newsroom/Latest-News/Pressemitteilungen-Details_788544.html)
4. [Project detail - ResponsAbility Asia Climate](https://www.fmo.nl/project-detail/63058)
5. [responsAbility Asia Climate strategy surpassed USD 200 million at second closing](https://www.responsability.com/en/press-releases/responsability-asia-climate-strategy-surpassed-usd-200-million-at-second-closing/)

__How do you measure the impact of responsAbility's blended finance deals?__

We take a rigorous approach to impact measurement, which we call the “4 eyes” principle. It involves two key teams: our in-house impact team and our Climate Advisory Specialist team. The latter comprises local technical experts who work hand in hand with an Investment Officer to estimate the impact of portfolio companies’ projects before and after investment. These specialists gather and analyze climate impact data, which is then validated and reported by our impact team - the two pairs of eyes. 

We’ve also developed a carbon measurement tool that tracks and reports climate impact, ensuring our data is accurate and transparent. Typically, we engage reputable external partners to review the fund’s portfolio carbon impact at the end of its life, further ensuring the veracity of our impact reporting. 

__Last year responsAbility was acquired by M&G plc, can you talk a bit about this and what the acquisition might signal for the impact investing and blended finance space?__

In May 2022, M&G plc., a leading international savings and investment company, acquired responsAbility. This acquisition underscores the growing interest among mainstream investors in impact investing and blended finance, as well as the increasing importance of sustainability in investment decision-making. What makes this acquisition particularly noteworthy is M&G’s active involvement in our recent initiatives. For example, in January 2023, M&G committed $274 million to two sustainable food strategies6 in Latin America and Asia, and in August, M&G’s Life business invested $100 million in the Asia Climate Strategy7. 

These large private investments highlight M&G’s strong commitment to impact investing and serve as a positive signal to other large institutional investors to engage more actively in this space, particularly in our pioneering structured blended finance strategies. 

6. [responsAbility announces first closings of two Sustainable Food strategies totaling USD 274 million](https://www.responsability.com/en/press-releases/responsability-announces-first-closings-of-two-sustainable-food-strategies-totaling-usd-274-million/)
7. [responsAbility Asia Climate strategy surpassed USD 200 million at second closing](https://www.responsability.com/en/press-releases/responsability-asia-climate-strategy-surpassed-usd-200-million-at-second-closing/)

__How do you see responsAbility's blended finance activities evolving in the future?__

Since our inception in 2023, we’ve raised over $2 billion in blended finance across various strategies, including the Global Climate Partnership strategy, the Access to Clean Power strategy, and the Social Bond focussed on financial inclusion, health, water, and sanitation. The Asia Climate Strategy, our newest flagship blended finance strategy, has a target size of $500 million and has already raised over $200 million, we expect to secure the remaining $300 million within the next year. 

Looking ahead, we’re committed to developing more high impact blended finance strategies, particularly in financial inclusion and climate finance, covering both mitigation and adaptation. We’re excited about the future and look forward to collaborating with Convergence and its members to further promote blended finance as a tool to mobilize private investments at scale to reach the SDGs.

Learn about responsAbility's blended finance strategies, how they measure impact, their acquisition by M&G plc., and more.

ResponsAbility Member Spotlight

responsAbility Member Spotlight with Henk Nijland

*This op-ed was originally published on [ImpactAlpha](https://impactalpha.com/three-africa-led-blended-finance-models-mobilizing-billions-for-development/).*

Innovations are accelerating Africa’s economic transformation. 

After two decades of continued economic growth, lingering impacts of the COVID-19 pandemic and recent global economic pressures have knocked the continent [off track](https://african.business/2023/09/resources/how-can-africa-salvage-the-sustainable-development-goals#:~:text=Aggravated%20by%20the%20Covid%2D19,50%25%20of%20the%20continent's%20population) on almost all Sustainable Development Goal targets. Substantial resources – $1.3 trillion a year or 42% of Africa’s $3.1 trillion gross domestic product in 2023 – are [required](https://uneca.org/chapter/economic-report-africa-2020/long-term-financing-sustainable-development-africa) to achieve the SDGs in Africa by 2030. Africa’s SDG financing gap is [equivalent](https://www.oecd-ilibrary.org/docserver/8d414b19-en.pdf?expires=1718889277&id=id&accname=guest&checksum=2E7DD53C40FE5B6BCD2ED20EB49846C7#:~:text=This%20annual%20sustainable%20financing%20gap,held%20stock%20of%20financial%20assets) to 0.2% of the value of global financial assets or 10.5% of African held financial assets. 

The resources exist, yet the current global financial architecture has not delivered. Meanwhile, the continent’s development finance institutions, or DFIs, and multilateral development banks, known as MDBs, are using innovative blended-finance solutions to mobilize appropriately priced private capital.

Here we highlight three first-of-their-kind approaches to blended finance by African DFIs and MDBs that can serve as models for future investment.  

__Sustainability-linked bond from the Development Bank of Rwanda__

The International Development Association, or IDA, Private Sector Window is a pool of concessional funds deployed through the World Bank Group to catalyze private sector investment in the poorest and most fragile countries. Rwanda’s development bank took advantage of this scheme to credit-enhance its first sustainability linked bond, becoming the first development bank to do so.

The Development Bank of Rwanda used $10 million of IDA funds to collateralize the $24.8 million 7-year local currency bond issuance, effectively reducing the risk for investors and the cost of borrowing for the bank. In the event of a default, investors have the recourse to take ownership of the collateral. The development bank’s funds were kept in escrow at the National Bank of Rwanda and were invested in Rwanda government bonds of the same tenor as the bond issuance.

This blended-finance structure not only reduced the cost of capital for the development bank but also enabled them to diversify away from their dependence on traditional funding sources (e.g. lines of credit or government funding). As a result, the bond was oversubscribed, with demand from over 100 investors. 

__Takeaway:__ The Development Bank of Rwanda’s application of concessional funding helped strengthen local capital markets and is a proof-of-concept with the potential to be replicated by other national development finance institutions in the continent.

__Green+ Class C shares from The Eastern and Southern Africa Trade and Development Bank__

In 2022, the Eastern and Southern Africa Trade and Development Bank [launched](https://www.tdbgroup.org/tdb-class-c-green-shares-launched-at-cop27-with-african-development-bank-being-first-investor-to-commit/) a novel financial instrument, dubbed “Class C shares” to reduce reliance on donor funding and provide a pathway to attracting institutional investors with investment-grade exposure. Class C shares [mobilized](https://www.tdbgroup.org/tdb-shareholders-approve-a-record-capital-increase-programme-of-usd-1-5-billion/) an additional $1.5 billion into the bank’s authorized capital stock while attracting non-traditional pools of capital including impact investors. Building on this success, at COP27 the development bank [issued](https://www.tdbgroup.org/tdb-class-c-green-shares-launched-at-cop27-with-african-development-bank-being-first-investor-to-commit/) a new category of Green+ Class C shares to increase climate finance flows into the continent. 

This latest equity instrument is the first of its kind within the development bank community, enabling institutional investors to support climate action with risk capital. Every dollar invested will be [leveraged](https://www.tdbgroup.org/tdb-class-c-green-shares-launched-at-cop27-with-african-development-bank-being-first-investor-to-commit/) up to four times into qualifying projects and transactions. To avoid diluting existing shareholders, this share class adds a new layer to the bank’s funding structure. While these shares do not come with direct voting rights, Green+ Class C shareholders receive senior priority over Classes A and B in the event of a liquidation. Two investors, the African Development Bank and the Clean Technology Fund (through AfDB), have cumulatively [committed](https://www.afdb.org/en/news-and-events/press-releases/african-development-bank-and-tdb-join-forces-deploy-clean-technologies-cut-carbon-emissions-africa-68580) $30 million to date. 

Global institutional assets worldwide stand at $400 trillion, the majority of which is invested outside low- and middle-income countries due to concerns around real and perceived risk. 

__Takeaway:__ The Eastern and Southern Africa Trade and Development Bank’s thematic Green+ Class C shares are a great example of how development banks can use their credibility to create viable pathways for global private investors to deploy capital in developing countries. 

__Hybrid capital notes from African Development Bank__

In the wake of calls by the G20 to review multilateral development banks’ ‘capital adequacy frameworks,’ and find ways to boost their lending capacity, African Development Bank has pioneered a new form of capital. Hybrid notes, issued by the bank earlier this year, are an interest-bearing asset like a bond, but low-ranking in repayment seniority (behind regular bonds), like equity. This equity-like characteristic means that hybrid notes can be leveraged to expand lending and provide an alternative to shareholder capital from governments.

The issuance was priced at a coupon rate of 5.75% and was oversubscribed by $6 billion (i.e. there was demand for 8 times what was sold). Interested investors included hedge funds, asset managers, central banks, and pension funds amongst others. This approach can be scaled as the size of the issuance is 6% of AfDB shareholders’ equity, whilst S&P Global has [said](https://www.cgdev.org/blog/one-small-step-afdb-one-giant-leap-all-mdbs) that it would be comfortable with a multilateral development bank issuing hybrid capital of up to a third of total equity. 

__Takeaway:__ These hybrid notes should be replicated. They both help the bank diversify its equity funding base away from fiscally constrained governments and provide private commercial investors an opportunity to support the development agenda at scale.

__Looking ahead__

Standardization and scale of financial products are key to mobilizing commercial capital towards Africa’s development priorities. The approaches articulated above demonstrate several patterns including credit enhancement, investment grade pathways for private capital, diversification of funding sources, and bolstering capital that should be replicated by other DFIs and MDBs across the continent. 

The ability of African development banks to be in the vanguard of financial innovation makes them arguably the most important and relevant financial institutions to lead the continent’s future growth and economic renaissance.

Learn about three first-of-their-kind approaches to blended finance by African DFIs and MDBs that can serve as models for future investment.

Three innovative Africa-led blended finance models

Opinion: Three Africa-led blended finance models mobilizing billions for development

African Guarantee Fund (AGF) is a specialized guarantee provider whose mission is to facilitate economic development and poverty reduction in Africa. To achieve this, AGF increases access to finance for small- and medium-sized enterprises (SMEs) across key economic sectors through an array of guarantee products and capacity development assistance. Since inception, AGF has unlocked $4.3 billion in SME financing, through partnerships with 250 partner financial institutions across 43 African countries.   

AGF is backed by the following shareholders and sponsors: The Government of Spain through the Spanish Agency for International Cooperation (AECID), the African Development Bank (AfDB), French Development Agency (AFD), Nordic Development Fund (NDF), Investment Fund for Developing Countries (IFU), German Development Bank (KfW), French Agency for Private Sector (PROPARCO), West African Development Bank (BOAD), Global Affairs Canada (GAC), USAID's West Africa Trade & Investment Hub (WATIH), The Norwegian Agency for Development Cooperation (Norad) and TechnoServe.  

We spoke with AGF’s Group Chief Executive Officer, Jules Ngankam, about how AGF works to achieve their mandate of facilitating access to finance for SMEs, enabling them to drive the growth of African economies.

__The total financing gap for Africa's 50 million SMEs, which form the backbone of Africa's economies, is [estimated](https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=17513) to be $330 billion. Tell us about the gaps AGF aims to bridge when it comes to SME financing in the context of Africa.__

AGF is committed to bridging the $330 billion SME financing gap by addressing several critical gaps in Africa’s budding business landscape. These gaps are related to: information, collateral, tenor, skills, product, and perception gaps. 

Below is an analysis of the gaps AGF aims to bridge.

![AGF Table Draft 1](//images.ctfassets.net/4cgqlwde6qy0/Yw9gKjCPqZX9Yha4MrvMD/34482d89f8e1511c4a0b60119cc1e20a/AGF_Table_Draft_1.png)
*Source: African Guarantee Fund*

__AGF offers intentionally designed products to bridge these gaps and address the needs of African SMEs, as well as to support financial institutions in serving these businesses. How do your products enable you to do this?__

By renewing and enhancing existing guarantee lines and targeting new prospects, AGF alleviates the challenges SMEs encounter in accessing finance.

We offer tailored guarantees that reduce the risk for financial institutions, making it easier for them to extend credit to SMEs without stringent collateral requirements.

Our products support all the funding needs of the SMEs, from debt to equity; working capital to capital expenditure; short term to longer-term financing solutions, as well as addressing the tenor gaps that hinder the growth of SMEs. We provide capacity development for financial institutions, ensuring they have the tools and knowledge to assess and manage their SME portfolio effectively. Additionally, we encourage the creation of innovative financial products that align with the unique business cycles and needs of SMEs, ensuring they receive adequate and appropriate financing.

By showcasing the success and potential of SMEs through our guarantee products, we help shift the perception of these businesses as viable and attractive financing prospects.

__Tell us about your suite of guarantee products and how you determine when to deploy them.__

AGF offers a suite of guarantee products designed to address specific financing challenges faced by SMEs, while also empowering financial institutions to extend their lending capabilities. Our Loan Portfolio Guarantees (LPGs) provide a 50-75% risk cover for on-lending to increase lending to SMEs with higher risk cover for Green SMEs and Women SMEs (WSMEs). This gives significant comfort to partner financial institutions (PFIs), encouraging them to increase their exposure to SMEs and WSMEs and take on risks they are not typically comfortable with. Below is a breakdown of our key products and how we determine their deployment:

1. __Loan Portfolio Guarantee:__ Covers multiple loans within a specified portfolio, helping PFIs scale up SME lending where collateral requirements are unmet. We use this when targeting a broader segment of SMEs, enabling PFIs to support more businesses simultaneously.

2. __Loan Individual Guarantee:__ Covers a single loan made by a PFI to a specific borrower. It is applied when a particular SME needs support, allowing PFIs to provide targeted assistance.

3. __Equity Guarantee:__ Covers the risk associated with equity investments by private equity or venture capital funds in SMEs, and it strengthens SMEs’ capital base by mitigating investment risks.

4. __Bank Fundraising Guarantees:__ Enables financial institutions to raise funds for scaling up credit facilities to eligible SMEs. This assists PFIs in securing long-term resources and facilitating the funding of long-term SME needs.

5. __Capacity Development:__ Here we provide PFIs with training sessions on financial product development, diversity, equity, and inclusion, market research, and customer service. This enhances PFIs’ understanding and willingness to revamp their processes and product offerings to cater to a broader spectrum of SMEs. 

Each product deployment begins with a thorough assessment of the specific needs and challenges faced by the SME or financial institution. Products are customized to address identified gaps, ensuring they provide maximum support and impact. There are also continuous monitoring and feedback loops to ensure the effectiveness of the deployed products and allow for adjustments as needed.

We also have structured guarantee products for specific sectors or unprecedented occurrences:

__Green Guarantee Facility__

With support from the Nordic Development Fund (NDF) and the Danish Investment Fund for Developing Countries (IFU), AGF has designed an innovative pan-African financing program, the Green Guarantee Facility (GGF) to support sustainable private-sector led economic growth in Africa. The GGF is a platform which combines a guarantee facility with a capacity development program to unlock greater financing for SMEs advancing climate change mitigation and adaptation efforts, as well as those working in climate-smart industries. The GGF is a market leader in green financing that crowds-in other financial institutions (FIs) to provide greater financial and/or capacity development supports.

__AFAWA Guarantee for Growth__

With support from the Group of Seven (G7) countries, the Netherlands and Sweden, and the African Development Bank (AfDB), AGF has created an innovative pan-African financing program, Affirmative Finance Action for Women in Africa (AFAWA) Guarantee for Growth (G4G), to encourage financial institutions to bridge the continent’s $49 billion gendered financing gap. AFAWA G4G is a gender-lens investing platform which combines a risk sharing mechanism with a capacity development program to unlock up to $2 billion in financing for African WSMEs and develop specialized WSME products. 

__You have a blended capital structure with a tranche for concessional capital providers such as donor agencies as well as private commercial capital. Why was this structure necessary and how does it enable AGF to achieve its mandate of scaling SME financing?__

AGF’s blended capital structure is essential for scaling SME financing effectively. It features a waterfall structure with tranches for concessional and private capital providers. This accommodates the diverse risk and impact profiles of various investors, offering flexibility to meet their unique needs and requirements. In terms of why this structure is necessary, summarily, it allows for diverse investor needs and risk mitigation. The waterfall structure allows us to tailor investment options, making it attractive to a wide range of investors, based on their varying risk tolerance and impact goals. By structuring investments in tranches, AGF also offers preferred positions to meet investor needs and address their constraints. 

This layered approach distributes risk appropriately, making it feasible to secure significant capital from diverse sources. This is how AGF attracts investments to achieve its mandate of scaling SME financing across Africa, driving inclusive economic growth and sustainable development.

__What about your work with donor agencies outside of your capital structure? You have partnered with Global Affairs Canada (GAC) on the Affirmative Finance Action for Women in Africa (AFAWA) program and with the Nordic Development Fund (NDF) on the Green Guarantee Facility. Tell us more about these programs and how these donor agencies are supporting in order to reduce the effective cost of the guarantees issued.__

Partnerships with organizations such as GAC and NDF enhance AGF’s ability to provide cost-effective guarantees and drive sustainable development across Africa.

Under the Green Guarantee Facility, for example, our partnership with NDF launched in 2016. This climate-focused initiative supports SMEs engaged in sustainable energy, cleaner production, climate-smart agriculture, natural resource management, and green services. By aligning with the Paris Agreement’s Nationally Determined Contributions (NDCs), AGF and NDF work together to enhance sustainability, stimulate green job growth, increase income, and improve the quality of life for low-income communities across Africa. Since then, other partners, such as IFU have joined AGF to contribute to the program.

With the AFAWA program, originally supported by the G7 nations and the African Development Bank, our aim is to improve women’s access to financing through innovative financial instruments and risk-sharing mechanisms. GAC contributed capital to support AFAWA, which aims to unlock up to $3 billion in financing for women-owned SMEs. The program also includes a risk-sharing instrument and a capacity development grant. AFAWA focuses on gender equality and financial inclusion, helping women entrepreneurs access the funding they need to grow their businesses and contribute to economic development.

Through strategic partnerships and collaboration like these, AGF’s capacity to issue guarantees increases, making financing more accessible and affordable for SMEs.

__An important feature of a guarantee is to reduce the difference between the perception and reality of risk. Can you give us a success story of an institution that you worked with that increased provision of credit to an asset class/segment?__

One of our success stories is our collaboration with a financial institution in East Africa that has been able to increase its women customer base from 28% to 40% through a tailormade product that addressed the specific needs of women entrepreneurs. 

The bank utilized AGF's guarantees and capacity development to mitigate risk concerns and confidently offer loans to this underserved segment. Over time, as the institution witnessed the robust performance and repayment rates of these loans, it gained a deeper understanding and appreciation of the true risk profile of women-owned SMEs. The success and positive impact of the program transformed the bank's perception as women accessing loans from this lender increased from 10% to 38%.

Our partnership has so far enabled the bank to:
- Grow its loan portfolio by supporting financing of businesses that lack required collateral who are mostly women SMEs.
- Improve the quality of the business portfolio for both the bank and customer through capacity development support especially for women entrepreneurs resulting in improved business operations.
- Grow its customer base as customer financing needs are adequately addressed through structured financing based on the facilities under the partnership.
 
Through the AGF guarantee and capacity development program the institution has developed enough confidence and expertise to sustainably provide credit to women entrepreneurs. Today, it has expanded its lending portfolio to include a significant share of women-owned SMEs, driving growth and empowerment in its community. This success story exemplifies how AGF's guarantees not only bridge financing gaps but also create lasting change in the financial landscape. 

__AGF applies a stringent Monitoring and Evaluation (M&E) framework to measure impact across strategic, beneficiary, and operational levels. Tell us about this framework and what are some key indicators to this end? Has your M&E approach evolved since inception?__

Our comprehensive approach to measuring impact allows us to gauge the effectiveness of our interventions in enhancing SME financing in Africa.

The purpose of our macro-level impact indicators is to assess long-term effects on financial markets and SME-targeted products. Some key metrics include: loan tenor, cost of loans, collateral requirements, and the share of loan portfolios favoring SMEs in countries of exposure. We take this measure every 3-5 years through surveys. Our goal is to demonstrate how sustained support triggers broader adoption of similar initiatives, contributing to economic growth and poverty reduction, aligning with the SDGs.

We also have outcome indicators at the beneficiary/SME Level. The purpose is to track direct effects on PFIs’ behavior and socioeconomic impacts on SMEs benefiting from guaranteed loans. This is measured by the number of SMEs accessing financing, effects of capacity development support, the share of PFIs’ loan portfolios to SMEs, non-performing loans among trained PFIs, SME revenue growth, job creation, gender distribution in SME ownership, and other socioeconomic changes. We do this using annual surveys and case studies focusing on primary data collection at the SME level, supplemented by data from AGF systems and field visits.

To monitor the direct activities and inputs from PFIs and AGFs output and input indicators, data on PFIs’ activities is reported monthly and quarterly to AGF, and the input data is retrievable from AGF’s database. 

Since its inception, AGF’s M&E approach has evolved to become more comprehensive and data-driven. Initially focused on basic output tracking, we now include sophisticated impact assessments and outcome measurements, ensuring a holistic view of our interventions' effectiveness. This evolution has enabled us to fine-tune our strategies and better support the SMEs we serve, ultimately driving more meaningful and sustainable economic development. By continuously refining our M&E framework, AGF ensures that our initiatives not only provide immediate financial support but also contribute to long-lasting positive changes in the African SME landscape.

__AGF now has a presence across 43 countries in Africa and has cumulatively unlocked $4.3 billion in SME financing since inception. Where does the organization go from here in terms of achieving scale and how can blended finance help you get there?__

AGF's journey to scale is ambitious and inspiring. We aim to grow our capital to $500 million by 2028, unlocking an additional $5 billion financing for SMEs across Africa. In achieving scale, we’ve sought to expand our reach with plans to deepen our presence in existing markets while exploring new ones, ensuring that more SMEs across Africa have access to financing. We are also developing and introducing new financial products tailored to the unique needs of African SMEs, so we can continue to address critical financing gaps. 

On the role of blended finance in catalyzing investments, blended finance combines concessional capital from donors with private capital to mitigate risks and attract more investors. We leverage resources to maximize the impact of each dollar invested, enabling AGF to significantly unlock more funding for SMEs. Ultimately, blended finance encourages collaboration between the public and private sectors, fostering partnerships, and aligning interests and resources to achieve optimal impact and support sustainable economic growth.

*By Karolyn Xie, Interim Head of Communications*

Learn how the African Guarantee Fund works to achieve their mandate of facilitating access to finance for SMEs, enabling them to drive the growth of African economies.

African Guarantee Fund Member Spotlight

African Guarantee Fund Member Spotlight with Jules Ngankam

*Figure 1: Market size and growth of blended finance for Sub-Saharan Africa SME-focused transactions*

In Sub-Saharan Africa, small- and medium-sized enterprises1 (SMEs), of which there are [approximately](https://www.nepad.org/blog/unlocking-potential-of-africas-smes-using-emerging-technologies-africa#_ftn4) 44 million, [comprise](https://www.weforum.org/agenda/2023/07/why-priming-africa-s-smes-for-growth-is-about-more-than-money/) almost 95% of all registered businesses and contribute to nearly 50% of the region’s gross domestic product (GDP). Despite their importance, 40% of SMEs in Sub-Saharan Africa [identify](https://www.lseg.com/content/dam/lseg/en_us/documents/media-centre/africa-sme-financing.pdf) a lack of access to finance as the primary factor constraining their growth, with some estimates put the current overall funding gap at more than $140 billion. This lack of funding [leads](https://www.lseg.com/content/dam/lseg/en_us/documents/media-centre/africa-sme-financing.pdf) not only to limited growth potential, preventing SMEs from evolving into larger corporates, but also the forced closure of millions of SMEs on the continent within a few months of launching.

Blended finance can play a role in addressing some of the real and perceived risks associated with investing in SMEs in Sub-Saharan Africa, thereby increasing their access to finance. The latest enhanced data brief from Convergence analyzes how blended finance approaches have been deployed to aid SMEs in Sub-Saharan Africa and presents insights from interviews conducted with industry stakeholders. This article provides a snapshot of the enhanced data brief, including opportunities and challenges in using blended finance for SME-focused transactions2 in the region.

*Click [here](https://www.convergence.finance/resource/blended-finance-in-sub-saharan-africa-sme-financing/view) for the Blended Finance in Sub-Saharan Africa: SME Financing enhanced data brief.*

__Data highlights from the brief:__

According to Convergence’s historical deals database (HDD), the blended finance market for Sub-Saharan African SME-focused deals consists of 145 transactions 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.

__34% of SME-focused blended transactions in Sub-Saharan Africa are in the agriculture sector__

Sub-Saharan Africa is especially vulnerable to climate change impacts given its dependence on rainfed agriculture. Agriculture is crucial for Africa’s economies, [comprising](https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS?locations=ZG) 17% of GDP and [supporting](https://reliefweb.int/report/world/africa-suffers-disproportionately-climate-change) over 55% of the labour force; however, the impacts of a changing climate have caused agricultural productivity to drop 34% since 1961, the highest decline globally. SME-focused blended transactions in Sub-Saharan Africa most frequently fall within the agriculture sector, with 18% in the agricultural inputs/farm productivity sub-sector and 17% in agro-processing.

Climate change risks only exacerbate the challenges agri-SMEs already have in [accessing](https://climatechampions.unfccc.int/harnessing-the-power-of-african-smes-to-deliver-both-nutrition-and-climate-goals/) traditional sources of finance. Blended finance can help de-risk these investments. For example, the West African Initiative for Climate Smart Agriculture (WAICSA) [uses a blended finance approach](https://www.climatefinancelab.org/ideas/the-west-african-initiative-for-climate-smart-agriculture/#:~:text=WAICSA%20builds%20climate%20resilience%20among,capacity%20for%20climate%2Dsmart%20lending.) to support agriculture SMEs in West Africa to incorporate climate-smart agriculture (CSA) technology. It provides subsidized interest rate loans to smallholder organizations and agribusinesses with ticket sizes below $1 million. WAICSA also provides capacity building and TA to help local financial institutions design loan products with CSA adoption conditions.

![ssa sme fig2](//images.ctfassets.net/4cgqlwde6qy0/4dzj57TqDTqD3fjeUJYfC0/187a9b87b3557d408c9ff34969537fa5/ssa_sme_fig2.png)

*Figure 2: Top 5 sub-sectors in Sub-Saharan Africa SME-focused blended finance transactions*

__Half of all Sub-Saharan African SME blended transactions are less than $25 million__

Sub-Saharan African SME transactions have a median size of $30 million (compared to $50 million for all blended transactions in the HDD), with 19% of the 145 transactions between $10-25 million in deal size and 18% below $5 million. These SME transactions tend to be smaller overall for a few reasons, including that SMEs are often start-ups requiring less capital. Another explanation could be the high-risk perception of these SMEs by banks and investors, making them less willing to invest larger amounts. Blended finance transactions also vary in deal size across countries within the region, which could be attributed to market maturity and varying levels of risk perception based on each country’s unique regulatory, political, and economic environments. For example, the average size of a blended SME transaction in Niger is $72.6 million, whereas in Nigeria, it’s $88.4 million.

![ssa sme fig3](//images.ctfassets.net/4cgqlwde6qy0/1OvjjUXXLVBRu9ZY0FPxoj/0598431cc166b2f496f6c4bbe526c679/ssa_sme_fig3.png)

*Figure 3: Sub-Saharan Africa SME transactions by total size*

__Opportunities and challenges for blended finance for SMEs in Sub-Saharan Africa__

Throughout our interviews with blended finance practitioners across Sub-Saharan Africa, several themes arose regarding challenges and opportunities for SMEs trying to access finance. One common challenge was that private investors are often deterred by the risks of financing SMEs, such as high default rates and a lack of collateral. By fully or partially shifting these risks from the investors to the guarantor, concessional guarantees can improve the risk profile of SME-focused investments by reducing costs to the investor, thereby making them a more attractive investment. 

Regional banks can also be especially risk averse, often preferring government-backed investments over SME loans. Blended finance solutions, such as concessional loans and technical assistance (TA), can help make SMEs more investment ready. TA can support SMEs in establishing proper financial and accounting foundations, thereby improving their creditworthiness and appeal to banks. Additionally, concessional finance can provide SMEs with lower-cost capital, extended repayment periods, and reduced interest rates, facilitating their growth and sustainability and making them a more attractive investment with a lower likelihood of default.

Local regulations can also present challenges, with varying policies across the region that can impede SME development. Blended finance offers a potential solution for mitigating the impacts of some these regulatory challenges. For instance, in Nigeria, local concessional guarantees could help counteract the effects of regulations that prohibit hedging with foreign currencies. In Ethiopia, design-stage funding and concessional loans could support SMEs in purchasing office space required for licensing. By leveraging blended finance, investors can navigate these complex environments, enabling greater SME investment and helping to overcome barriers like high investment minimums across the region and outdated business licensing requirements.

SMEs in Sub-Saharan Africa are vital for local economic development, but their growth is hindered by limited access to finance. Blended finance, through mechanisms such as concessional guarantees and TA, can help de-risk investments and make SMEs more attractive to private investors. Addressing these challenges also requires tailored solutions, capacity building, and enabling policies to reduce barriers and facilitate capital access.

For further information on Convergence’s methodologies, click [here](https://www.convergence.finance/about/data-methodology?). 

__Become a [member](https://www.convergence.finance/membership) and read the [full brief](https://www.convergence.finance/resource/blended-finance-in-sub-saharan-africa-sme-financing/view).__

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1. Convergence uses the definition of SMEs provided by the World Bank, however transactions are analyzed using publicly available data. An SME-transaction is therefore defined as such based on the disclosure by an investor through publicly available sources, and subsequent due diligence by Convergence against the World Bank definition where possible.
2. An SME-focused transaction is defined as one that either provides direct benefits to an SME, for example through funding an SME expansion, or indirect benefits, such as supporting a fund that invests in SMEs

Key takeaways from our Blended Finance in Sub-Saharan Africa: SME Financing enhanced data brief.