The Editors' Post: COP27 and the rise of blended finance

In the past few weeks, blended finance has emerged in the public eye as a solution to the lack of funding to fight climate change and other issues in developing countries – very much on the agenda at COP27 and pushed in discussions ahead of G20 with the official launch of the Global Blended Finance Alliance.

Blended finance is not a new concept. It typically refers to a mix of public- or philanthropic-backed finance, often coming from DFIs, multilaterals or foundations, and private capital. The former, coming from investors that, broadly, can afford to lose their money, provides first-loss capital and de-risks investments, where private impact investors – who want to ensure they get impact with returns – can then safely invest their money. (In the UK, it is defined slightly differently).

To fight and importantly build resilience to climate change, developing countries need a lot more money than they currently get – and there isn’t enough public funding available to fill this gap (whether more should be made available is another story). That’s why driving private investment to climate projects and social enterprises in emerging markets is essential.

But private investors perceive investing in developing countries as particularly risky (there’s disagreement as to whether this perception is justified); to de-risk those investments, blended finance sounds like a no-brainer.

When it comes to blended finance, there are countless financial instruments to suit the needs of every social enterprise and more innovative ones are being developed every day, but it does require a shift in mindset. Anzetse Were from FSD Kenya looks at the challenges for climate finance in Africa on how to invest in an economy that is to a large extent informal, and how a new approach is needed.

The question is: will DFIs adopt those new approaches as they commit ever more millions to climate finance in developing countries? Will enough pioneering impact investors demonstrate how it’s done? 

The future of the social economy

What’s the future of the social economy in Europe? That was the topic of many discussions I heard at ImpactFest in the Hague on Tuesday. As Euclid Network published the results of the largest survey of social enterprises on the continent, key figures of the social economy – from policymakers to network bodies and social entrepreneurs – sat around a table to discuss how to shape the future of the sector. Conclusion? The future of the social economy needs to be built with the voices of social entrepreneurs, in all their diversity.

Also this week in Pioneers Post, an update on impact startups from Dealroom; how Asia’s social investors can push forward women’s economic empowerment; how to understand the risky business that is social business; and much more.

This week's top stories: 

Why Asia's social investors are taking urgent action to close the gender gap

More corporations buying social could transform European social enterprise sector – new report

London is global B Corp capital as UK certifications double in one year

Top picture: alexeygalutva on Freepik

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