State of Blended Finance 2023

Climate change continues to be central to the blended finance market and to sustainable development more broadly.

In PART I of the report, blended finance data and insights provide a market overview with a look back to last year’s report and an assessment of the current challenges, macroeconomic impacts, and exogenous shocks that have equally shaped the broader climate finance market and the climate-related blended finance market. This section also reviews recent downturns in sustainable investment and points at specific opportunities where blended finance can serve as an active mechanism to respond to the global challenges that adversely impact funding flows.

In PARTS II & III, climate data, deal trends, and investor trends are presented. Climate blended finance trends are analyzed through three lenses:

1. mitigation blended finance;
2. adaptation blended finance; and
3. hybrid blended finance.

They are further broken down across vehicle type, geographic region and country, country income level, recipients, SDG alignment, and archetype and instruments. Investor trends focus on investor activity and investor type and incorporate stakeholder perspectives of key market participants engaging in climate blended finance.

PART IV provides a comparative breakdown of mitigation blended finance and adaptation blended finance transactions by analyzing and contrasting deal and investor types, addressing fundamental challenges and barriers to catalyzing private capital, and revealing solutions, opportunities, and viable business cases for scaling. Nature-based Solutions are highlighted along with associated funding challenges and opportunities. The disparity between mitigation and adaptation blended finance is further explored through key stakeholder interviews with experts in the field.

PART V explores country-level platforms in climate blended finance and evaluates Just Energy Transition Partnerships (JETPs), as a partnership model for mobilizing climate blended finance. JETPs are analyzed and compared through stakeholder interviews that identify strengths, challenges, opportunities, and recommendations.

PARTS VI & VII highlight key areas where blended finance can contribute and offer specific recommendations on the role climate blended finance can play in driving private investments at scale while identifying the appropriate blended finance architectures in developing regions.