Fixing fictions through blended finance: The entrepreneurial ensemble and risk interpretation in the Blue Economy

This paper presents findings from research on how blended finance actors use and define different key concepts, and what implications these understandings have for evaluators. By increasing awareness of key terms and their use, the paper can contribute to facilitating the evaluation process, simplifying the communication of findings and results, and ease collaboration between different actors. It provides a useful framework for thinking about core concepts related to blended finance, differences in how these are used today, and the implications this has for evaluation methods and approaches. The work will be of interest to monitoring and evaluation departments, development finance institutions, international financial institutions, impact investors, private foundations and others interested in blended finance and its role in contributing to sustainable development. This paper is the first in a series of three working papers from the OECD/DAC EvalNet Working Group on Evaluating Blended Finance.

The Intermediate Treatment Facility (ITF) Nambo is a waste processing infrastructure project in West Java that has faced long delays due to financial and institutional challenges. Although the project was initially tendered using a public-private partnership (PPP) scheme, it failed to achieve financial close due to equity constraints, absence of certainty in revenue from output, and limited access to long-tenor loans. This study explores how blended finance can be used to improve the financial viability and bankability of the project. Using data from the 2015 Final Business Case and 2022 Feasibility Study, six financial scenarios were modeled to assess the impact of key variables including debt-equity ratio, RDF pricing, loan rate and tenor, and concessional finance instruments. The Development Finance Institution (DFI) Enhanced Principle is also used to assess the feasibility of the project in incorporating blended finance. Results show that under baseline assumptions the project is marginally viable, but becomes unfeasible under more conservative market conditions. Incorporating concessional debt and a credit guarantee into the capital structure significantly improves financial viability. The optimal scenario shows a lowered WACC of 6.14%, an IRR of 6.47%, and a positive NPV, even with conservative RDF price assumptions. The project also meets the minimum debt service coverage ratio (DSCR) required by lenders. This study recommends a blended finance strategy that leverages concessional funding and credit enhancement to reduce risk, lower financing costs, and transform the project to become bankable thus catalyze private investment. It provides practical insights for policymakers and developers to unlock financing for high-impact infrastructure projects in emerging sectors like waste management.

This study aims to find out what and how Blended Finance is and specifically and to provide new insights and practical examples of Blended Finance in Indonesia. This research is qualitative research with a library study approach and interviews with practices in the field of Blended Finance. This research reveals a new definition of Blended Blended Finance as one of the systems that can answer the need for funds to make the SDGs a success by using the 4P funds, namely public, private, philanthropy and people. Blended Finance in Practice in Indonesia, among others, SDG Indonesia One, Tri Hita Karana Roadmap Blended Finance, The Sustainability Project Bond from the Tropical Landscape Finance Facility (TLFF), and the Marine and Fisheries Funding Institution (IPKP). The challenges in implementing Blended Finance in Indonesia are building a general knowledge base, lack of coordination or the emergence of ego institutions and the absence of appropriate projects or programs that are ready for financing. The existence of personnel or institutions as a tailoring project is the key to the success of blended finance.

The Blue economy impacts the livelihoods of many Caribbean people, particularly those living at or near the coast. However, to realise the opportunities of the Blue Economy, the Caribbean requires funding, awareness and technical capacity and a more supportive policy environment. Financing investments in the Blue Economy will entail more than what traditional domestic resources and traditional international sources of finance can provide. In the absence of innovative and practical financing strategies, financing will be one of the most important factors inhibiting the ability of the Caribbean to invest in this potentially new economic paradigm. A conscious effort must be made to develop capacities, policies and strategies that will enable countries to leverage alternative sources of finance, such as international climate and environment funds. Options around blended finance, blue and development impact bonds, as well as digital resources such as Fintech present practical opportunities. Innovations used in the Green Economy may also be applicable to the Blue Economy such as debt swaps. The Caribbean must therefore improve national capacities and practices, align resources more strategically and align national development plans to Blue Economy priorities in order to leverage available resources, and also implement viable projects.

The global community is facing escalating acute food insecurity crises, predominantly in Sub- Saharan Africa, due to climate change, the Russia-Ukraine conflict, and COVID-19 shocks. Related impacts on donor government budgets, domestic conflicts and limited fiscal capacity in countries already experiencing acute food insecurity, often on top of high chronic food insecurity levels, further exacerbate the issue. This policy brief examines the potential of private sector financing to alleviate acute food insecurity, through providing a targeted review of key mechanisms for mobilizing private sector investment in priority regions affected by acute food insecurity. These mechanisms include (1) donor-private sector partnerships, (2) private sector industry initiatives, and (3) standalone investors and institutions. They have been analysed through case studies and stakeholder consultations, to offer insights into the potential of private sector investment to address acute food insecurity challenges. The analysis emphasizes the role of private sector commercial investment, including short-term investments in addressing immediate food supply needs and medium- to long-term investments in enhancing the resilience of local food systems, focusing on geographies experiencing Integrated Food Security Phase Classification (IPC) Acute Food Insecurity Phases 2 and 3.1 These are acute food insecurity contexts where the private sector might still perceive a viable investment opportunity and where such investments can contribute to building more resilient food systems. Based on this initial review of mechanisms to mobilize private sector financing, the brief concludes that private sector financing has a role to play in building the resilience of medium-term food systems in order to prevent future emergencies, but that it is not suitable for addressing short-term, urgent financing needs related to acute food insecurity that is at crisis levels or near to them. Private sector investors also need significant de-risking and blended finance in countries that are most affected by acute food insecurity, as well as policy predictability and demonstrated national commitments to domestic and regional food and agriculture strategies, due to the long timeframes of, and risks for, most agricultural investments. This indicates that substantial additional donor and public sector intervention is needed to catalyse private sector investment and to direct it towards investments that will have the biggest impact on food security. Learnings from the case studies and other documents reviewed for this policy brief, along with interviews with a range of sectoral stakeholders, indicate that initiatives to mobilize private sector investment should prioritize two objectives so as to achieve the most food security impact. These will shift countries that are experiencing acute food insecurity away from exporting unprocessed agricultural production and importing consumable food and towards national and regional processing and value addition for local consumption. First, focus efforts on catalysing private investment in local agricultural processing and value addition. The missing value chain link in many acutely food-insecure countries is local processing and value addition capacity, which would also provide local off-take for domestic agricultural production. Many initiatives to date have not focused on this piece of the equation, but rather on access to inputs and smallholder farmer support. Second, leverage blended financing to mobilize local financial institutional lending to processing and value addition SMEs. Local currency lending is often the type of financing that agricultural SMEs most need: SME financing needs are not well-matched with the types of foreign currency investment that development finance institutions (DFIs) and other international investors offer, especially with regard to ticket size and return expectations. This brief also recognizes the limitations of its approach and the complexity of the dynamics around using private sector investment to alleviate acute food insecurity. Therefore, the brief concludes by highlighting critical questions for further research, including the positioning of smallholder engagement for food security, innovation in blended financing instruments, and enabling trade and agricultural policy frameworks.

To close persistent global health financing gaps, policymakers have in recent years promoted the idea of ‘blended finance’, i.e. the strategic use of public funds to attract additional private sector investment. To better understand this trend, this paper studies three major blended finance instruments, namely vaccine bonds, advanced market commitments, and matching funds. In doing so, this paper makes two important contributions. On a practical level, it shows that these three blended finance instruments tend to be expensive and of questionable effectiveness. Their high costs favour large corporate actors, private investors and middlemen, while their benefits for potential beneficiaries in low- and middle-income countries and for public donors remain unclear. On a theoretical level, the paper asks why these instruments remain popular in policy circles despite their shortcomings. It finds that blended finance mechanisms proliferate thanks to their seemingly innovative nature, a constant emphasis on urgency or crisis, and the promise of combining market-based self-interest with positive social impact. The paper ends on a call for much greater critical scrutiny concerning blended financing mechanisms.

The longstanding debate of whether environmental, social and governance (ESG) issues impact financial performance appears to have given way to identifying the best way for firms to achieve long-term sustainability. In this essay, we suggest that overlaying ESG issues with the United Nations’ Sustainable Development Goals (SDGs) provides an avenue for firms to transition to sustainable business models. To this end, the pursuit of sustainable opportunities via blended finance, mechanisms whereby the private sector, nonprofits and public actors work together in an effort to tackle the most pressing global challenges, could help to de-risk private sector involvement in sustainable development. We argue that de-risking occurs through three mechanisms: (1) identification of material ESG issues for firms, (2) the use of subsidy via blended finance instruments, and (3) trust brokering from civil society and public sector actors. Through two illustrative case studies, we identify the challenges and opportunities of blended finance to serve as a tool to meet Agenda 2030.

Blended finance approaches could mobilise some of the significant investments needed to build more sustainable, diverse and dynamic economies and societies in least developed countries that can withstand future crises and drive Sustainable Development Goal (SDG) achievement. This chapter explores the different roles blended finance can play in the short- and medium-term responses to COVID‑19, as well as against the key risks associated with least developed countries (LDCs) that are emphasised by the crisis. This chapter also outlines key priority sectors where blended finance could be strategically deployed to catalyse investments that will help to accelerate a resilient COVID‑19 recovery and progress on the SDGs.

Over the last decade, Development Finance Institutions (DFI) attracted more and more attention from policymakers particularly to catalyze investments above and beyond public resources starting with Official Development Assistance (ODA). While DFIs are increasingly committed to finance industry or infrastructure development in the Global South, they face important challenges to support agriculture despite political mandate and incentives. Indeed, looking at their agriculture portfolios in the last three decades, we show that DFIs tend to disinvest from primary production agriculture companies and to move to agriculture finance and agroindustry. While the existing literature on this topic has mostly engaged with particular risks associated with agriculture, we move a step further by considering the financialization of development policies as the main obstacle to agricultural development. In the first section, we briefly describe the recent evolution of agriculture development policies’ narratives, which are increasingly focused on bridging the funding gap. We then present our findings from a longitudinal analysis from the year 2000 onward, of two DFIs’ agriculture portfolios, to look at the underlying companies and activities populating this “asset class”. We show that DFIs’ contribution to close the funding gap is very limited. In the last section, we seek to explain this shortfall by focusing on the day-to-day making process of agriculture investments.

The OECD Survey on Blended Finance Funds and Facilities represents a major step forward to consolidate evidence to inform policy makers and market players in the blended finance field, as they strive to both mobilise and shift financing towards the Sustainable Development Goals (SDGs). This working paper presents findings from the 2018 edition of the OECD survey relating to the development strategy, performance tracking and evaluation approach of the surveyed blended finance funds and facilities. It provides new evidence on the extent to which blended finance vehicles anchor their investment strategy, as well as their environmental, social and governance (ESG) safeguards, to international agreements on sustainable development. It investigates how blended finance vehicles structure their monitoring and evaluation function, track development performance and assess development results.

This report examines investment opportunities and needs in Pacific Small Island Developing States (SIDS), emphasising climate finance, renewable energy, and the blue economy. It highlights the challenges faced by Pacific SIDS, such as economic vulnerabilities and high climate risk. Key strategies to attract private investment include improving enabling environments, de-risking investments, and enhancing project pipelines. Existing investment vehicles like blended finance, green bonds, and regional finance facilities are discussed, along with recommendations to integrate climate risk into planning and boost public financial management.

This report discusses key issues around the mobilization of private capital for development. Investment requirements are huge, especially for infrastructure, climate and other SDG-related investments. External finance for developing countries stagnated in the years before the pandemic, followed by a major setback in 2020/2021. The focus is in particular on institutional investors, whose exposure to less-developed countries is still very low, even more so in unlisted assets and projects. There is a potential for progress as asset owners seek new diversification opportunities in growth markets. The main burden is on governments to create favourable business conditions for investable long-term assets. Policy makers, development finance institutions and investors should utilize the full spectrum of investment vehicles - commercial, impact and blended finance.

Complex infrastructure finance transactions are characterized by high capital intensity, extended repayment horizons, and significant political, market, and operational risks. The involvement of diverse stakeholders—including governments, private investors, development finance institutions, contractors, and regulators—further amplifies complexity, making effective negotiation and structured deal design critical to project success. This study explores strategic negotiation methodologies and multi-stakeholder deal structuring as foundational mechanisms for aligning diverse interests, optimizing risk allocation, and ensuring long-term sustainability of infrastructure investments. Strategic negotiation methodologies, including interest-based bargaining, game-theoretic approaches, and adaptive negotiation models, provide frameworks for building consensus, fostering collaboration, and anticipating dynamic changes in policy or market conditions. The integration of cross-cultural and political sensitivities is highlighted as essential, particularly in emerging markets where institutional capacities and governance frameworks may be uneven. These negotiation tools enable parties to move beyond adversarial positions toward cooperative solutions that maximize shared value. Multi-stakeholder deal structuring complements negotiation by embedding agreed principles into resilient financial and governance frameworks. Mechanisms such as blended finance, syndicated lending, and equity–debt hybrids distribute risk and enhance project bankability, while credit enhancements and guarantees provided by multilateral institutions mitigate sovereign and counterparty risks. Transparent governance structures, performance-based contracting, and ESG-linked incentives further strengthen trust and accountability across parties. Case illustrations from energy, transport, and digital infrastructure projects demonstrate how carefully designed negotiation and structuring strategies determine the difference between successful implementation and costly project failure. This concludes that advancing infrastructure finance requires a paradigm shift toward data-driven, transparent, and inclusive negotiation models coupled with robust deal structuring. These innovations are essential for mobilizing capital, safeguarding stakeholder interests, and achieving sustainable infrastructure outcomes in both developed and emerging contexts.

This joint report highlights opportunities for mobilizing investment for a sustainable blue economy in Asia and the Pacific, focusing on small and medium-sized enterprises (SMEs). SMEs’ limited access to capital makes them the “missing middle” in sustainable blue economy development. This report proposes SME sector priorities in the blue economy, analyzes the financing gap, and shares tools and resources to support new financial connections between international capital and local actors. It recommends the establishment of a new blended finance platform—SME BlueImpact Asia—to help fill the estimated $2 trillion SME blue economy financing gap in developing Asia.

Initially launched in 2017, the OECD annual Blended finance Funds and Facilities Survey compiles and analyses information on collective investment vehicles, one of the primary channels for blended finance. In 2020, the third annual edition captured 198 vehicles, representing USD 75 billion assets under management. The survey helps policy makers and private sector actors better grasp the size and shape of a segment of the blended finance market. By bringing together data of different development actors that, collectively, are a significant contributor to sustainable finance, this survey makes an important contribution to enhancing understanding and transparency. Transparency is increased through the data collection and analysis, and understanding is increased through the aggregation of the data that highlight the main investments trends. The quantitative analysis is complemented by OECD statistics on private finance mobilised by official development interventions, as well as by information provided by other specialised institutions. This new evidence confirms trends observed on the broader blended finance market in terms of priority sectors, geographical coverage and the Sustainable Development Goals targeted. This year’s edition also explores additional aspects such as investors, clients and investment instruments, and has a particular focus on gender.