Using risk sharing or blended finance products to mobilize additional finance

Why? The blending of public and private funds can help overcome a range of investment barriers (e.g., market or political) as well as reduce the risk often perceived by private financial institutions around climate-related investments. This can improve access to capital and the terms of finance in countries, sectors and technologies often seen high-risk.

How? A range of different tools may be used depending on the level of maturity of markets and technologies and the specific market barriers projects and companies may face. These include instruments such as guarantees, insurance, currency hedging, technical assistance grants and first loss capital from development agencies. Different combinations of these forms of concessional funds and instruments are typically used by development banks and philanthropic sources to “crowd in” or “leverage” commercial investment in both developed and developing countries.