Blended Finance as a Sustainable Development Support Mechanism
Blended Finance as a Sustainable Development Support Mechanism

Author(s): Ivana M. Ostojić, Predrag Petrović, Vasko A. Kelić
Subject(s): Economy, Business Economy / Management, Financial Markets
Published by: Институт друштвених наука
Keywords: Blended finance; Sustainable development; Development finance institution; Private sector investment
Summary/Abstract: It is widely agreed that public resources will not be sufficient to cover the investment gap needed for the sustainable development goals achievement (around USD 2.5 trillion annually in developing countries). The development finance landscape has changed in terms of actors, financial instruments, motives and goals. Blended finance is an important mechanism for encouraging the growth of private sector investments in sustainable development projects in which development finance institutions have a significant role. Public and philanthropic capital can catalyse private sector investments that provide financial incentives and create innovative solutions to achieve the sustainable development goals in underdeveloped countries. By improving the risk-return profile of investments without disrupting functioning markets, blended finance encourages and mobilizes private capital in emerging and frontier markets, where public sector resources and donor funding are limited. In the following paper, the blended finance concept and its connection with complementary development strategies, its importance in supporting sustainable development, as well as the blended finance instruments and mechanisms, will be explained.

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