NZAOA: Policymakers must support blended finance to achieve Paris climate goals and the SDGs

Policymakers must facilitate the scaling of blended finance structures to fund climate solutions if the world is to achieve both the Paris climate goals and the UN Sustainable Development Goals (SDGs), said the UN-convened Net-Zero Asset Owner Alliance.

In a call on policymakers– signed by UN Special Envoy for Climate Action and Finance Mark Carney and UN High-Level Climate Action Champion, Nigel Topping and supported by the Sustainable Markets Initiative and the Investor Leadership Network – the Alliance said blended finance structures would go a long way to mobilising the flow of climate capital towards emerging markets and developing economies (EMDEs).

Currently, significant capital to finance clean technology, low-carbon infrastructure, sustainable business models and adaptation measures is readily available but not ending up in EMDEs or in the technologies that are most needed.

The potential of multilateral development banks (MDBs) and development finance institutions (DFIs) in mobilising private capital through blended finance is also significant, given their experience and expertise, especially in EMDEs, coupled with their higher risk tolerance and their official development mandates.

Günther Thallinger, Chair of the Alliance and Member of the Board of Management of Allianz SE, said, “Using blended finance structures is simply a win-win for the public and private sectors. While the private sector benefits from an improved risk profile, the public sector and the philanthropic community achieves a multiplier effect.”

To achieve this, the Alliance asks that policymakers:

1. Scale and aggregate pools of concessional capital that create fiduciary investment assets
2. Modernise the governance and business models of MDBs and DFIs to align with the SDGs and Paris Agreement
3. Support accurate risk pricing by providing access to core credit risk data
4. Prioritise thematic parameters in official development assistance
5. Make guarantees eligible for official development assistance

These actions are urgently needed to incentivise and utilise blended finance structures at scale. The Alliance aims to contribute to the implementation of the highlighted solutions by collaborating with Convergence and by establishing a dialogue with the members of the Coalition of Finance Ministers for Climate Action.

The Net-Zero Asset Owner Alliance and UNEP FI is hosting a high-level forum, Scaling Blended Finance for Climate Solution Investment in Emerging Markets, on 5 Oct at 16.00 CEST. Register here.

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