Blended Finance / Caroline Flammer, Thomas Giroux, Geoffrey Heal.

Format:

Book

Author/Creator:

Flammer, Caroline.

Contributor:

National Bureau of Economic Research.

Giroux, Thomas.

Heal, Geoffrey.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32287.

NBER working paper series no. w32287

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

Blended finance---the use of public and philanthropic funding to crowd in private capital---is a potential way to finance a more sustainable world. While blended finance holds the promise of being catalytic in mobilizing vast amounts of private capital, little is known about this practice. In this paper, we provide a conceptual framework that formalizes the decision-making of development finance institutions (DFIs) that engage in blended finance. We then provide empirical evidence on blended finance using data from a major DFI. The key variable we study is the level of concessionality, which captures the subsidy from the blended co-investment. Our findings indicate that DFIs provide higher concessionality for projects that have a higher sustainability impact per dollar invested. Moreover, the concessionality is higher for projects in countries with higher political risk and a higher degree of information asymmetries. In such cases, the blending tends to also include risk-management provisions. These findings are consistent with the predictions from our conceptual framework, in which DFIs have a limited budget that they allocate across projects to create societal value.

Notes:

Print version record

March 2024.