Blended Finance: Unlocking Capital for Impact and Competitive Returns

We're pleased to release our latest publication, Blended Finance: Unlocking Capital for Impact and Competitive Returns.

Blended finance represents an innovative financing approach that addresses the critical gap between impact-first and return prioritised investment objectives.

This new FaithInvest whitepaper explores the mechanics, applications, and real-world examples of blended finance structures that have successfully mobilised capital toward environmental and social challenges while delivering competitive returns.

Wherever your organisation is on its FCI journey, we believe blended finance structures are well worth understanding, and potentially implementing, "for people and planet"!

Key findings of this whitepaper include:

• Blended finance provides a solution to the persistent challenge where socially and environmentally valuable projects struggle to attract sufficient capital due to misalignment with conventional investor risk-return expectations.

• By creating tiered investment structures with varying risk-return profiles, blended finance enables diverse investors to participate in the same projects while meeting their individual financial and impact objectives.

• Catalytic capital from development finance institutions and philanthropic sources can provide risk mitigation that makes projects more attractive to market-rate investors.

• Case studies across affordable housing, sustainable forestry, and renewable energy showcase how blended finance has unlocked significant capital while delivering both social/environmental impact and financial returns.

• Faith-based organisations are uniquely positioned to benefit from blended finance structures that can participate across multiple tranches that offer varying degrees of risk and return, aligning investments with values while meeting fiduciary responsibilities.

Despite mobilising approximately $249 billion in capital towards sustainable development to date[1], blended finance remains underused as an investment strategy considering the much larger size of the overall impact investment universe, which the Global Impact Investing Network (GIIN) estimates at $1.571 trillion[2].

This whitepaper aims to inform investors, particularly faith-based asset owners, about this effective approach to achieving dual objectives of positive impact and competitive returns.

[1] Source: https://www.convergence.finance/blended-finance

[2] Source: Sizing the Impact Investing Market 2024