We are proud to share a new paper that builds on our commitment: to develop blended finance solutions to mobilize the capital needed to tackle the world's toughest challenges.
Entitled "How Investors Can Leverage Blended Finance Structures: Demystifying Credit Enhancements for Investors", we show how credit enhancements – often treated as technical additions – are in fact a strategic lever in investors' sustainable finance toolbox.
They help align the objectives of the sponsoring institutions with the risk-return expectations of private investors, reduce project risks and strengthen credit profiles.
In short, they improve solutions that might otherwise block large-scale investment opportunities.
Some takeaways from the article:
- Blended finance is essential but underutilized to close the sustainable development finance gap in emerging market and developing economies : it accounts for a small fraction of total development finance (2 percent of total MDB investment).
- Tiered fund structures, with credit enhancement and currency risk mitigation, offer a promising approach to raising private capital while managing risk. In 2024, guarantees were the main instrument used in blending operations, accounting for 46% of the concessional instruments used.
- Effective credit enhancements not only reduce risk, but also improve investment conditions, unlock new investor bases, and increase the scale and impact of blended finance. This approach allows investors to access projects and markets that they would otherwise have avoided due to risk concerns, while benefiting from longer maturities, better prices and local currency financing. It also offers investors a unique combination of sustainable impact and financial performance, supported by innovative risk mitigation tools that help overcome traditional barriers to investing in emerging and developing countries.
This information is important because it informs the conversations that will shape the future of blended finance.
Notably, in Washington D.C., where one of our delegations attended the Annual Meetings of the IMF and the World Bank from October 13 to 18, a pivotal forum for discussions on the global economy and sustainable development.
Our delegation was composed of Jean-Jacques Barbéris, Director of the Institutional and Corporate Clients Division; Eric Dussoubs, Director of Public Sector; Sergei Strigo, Co-Head of Emerging Markets Fixed Income; Esther Law, Senior Portfolio Manager, Emerging Markets Sovereign and Head of Responsible Investing; and Perrine Theillard, Head of Responsible Investment Partnerships and Advocacy.
Together, they engage with key stakeholders to show why credit enhancements deserve a central place in the sustainable finance toolbox, and how investors can build on them to generate both impact and returns.
