The Economics of Blended Finance

Caroline Flammer, Thomas Giroux and Geoffrey M. Heal

AEA Papers and Proceedings, 2025, vol. 115, 397-402

Abstract: Projects with high societal impact—such as biodiversity conservation and climate change mitigation—often offer financial returns that are too low, or too risky, to attract private capital. Under such circumstances, it can be difficult to raise adequate financing for these projects. A potential solution is blended finance, that is, the blending of concessional funding (e.g., from governments, multilateral development banks, or philanthropies) with private capital. We present a model that shows how blended finance can improve the risk-return profile of private investments and hence serve as a catalyst for private capital investments in projects with high societal impact.

JEL-codes: F53 G31 H43 H44 Q54 Q57 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/pandp.20251072

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