Blended Finance

Blended finance or blended capital is an innovative approach to development financing that strategically combines or “blends” public, philanthropic, and private capital to fund sustainable development initiatives, particularly in low income and developing countries. Blended finance works by using public or philanthropic funds (concessional capital) to catalyze private sector investment in projects that contribute to sustainable development but may not otherwise attract commercial funding due to high perceived risks or low returns. As such, blended capital is used to subsidize and de-risk private capital, serving as a catalyst for private capital investments in projects that create societal value but would otherwise not be financed. Blended finance has helped fund a broad range of projects (particularly in developing countries) on renewable energy, infrastructure, climate technology, nature-based solutions, and financial services. It has been less prevalent in social sectors like education. Source: Flammer et al. (2026). UNESCO Fact Sheet.