A feature of blended finance is that it allows investors to decide how much risk they are willing and able to take on for a particular project. Investors come from a wide range of backgrounds. Whether they are government actors, private sector investors or philanthropists who want to make
a difference in the region depends entirely on the size and importance of the project. In general, however, if an investor provides more capital, this can act as a buffer for unforeseen situations.
Importance
The concept of blended finance is an important factor in supporting the United Nations’ Sustainable Development Goals (SDGs). These set out 17 goals to enable sustainable development in the economic, environmental and social spheres. According to Convergence, a global blended finance network, all developing and emerging countries lack USD 4.2 trillion per year to achieve these goals.
Example
One example of blended finance is IDB Invest’s equity investment in Cargo X, the largest digital platform for truck freight in Latin America.
The technology is used to connect large shippers with smaller ones. The IDB has invested USD 9.9 million in this project, supported by a further USD 4.5 million in blended finance from the Climate Investment Funds (CIF). The CIF’s involvement will incentivise the company to return shares
to the company’s stock option plan, thereby reducing the greenhouse gas emissions resulting from its business model.
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