ImpactAlpha, April 26 – Not all investors are hip to impact as an investment thesis. They need a nudge to make the leap. Blended finance practitioners structure investments that use philanthropic and development funding to reduce risks and boost returns for private investors.
With a bit of financial engineering, blended finance proponents hope to mobilize enough private capital to close the $2 trillion to $3 trillion annual gap in financing necessary to deliver on the U.N. Sustainable Development Goals. Now, the Blended Finance Taskforce, a subset of the Business and Sustainable Development Commission, has released a plan to turn all that nudging into a coordinated thrust toward that goal.
- Sustainable infrastructure commitments… The plan calls for the formation of a ‘Clean Investment Club’ of asset owners, in time for California Governor Jerry Brown’s Global Action Climate Summit in September, that commits members to allocating 2% of their portfolios to sustainable infrastructure by 2020 and 5% by 2025 in line with their fiduciary duties.
- Closing gaps… By 2025, that commitment would mobilize half a trillion dollars a year to sustainable infrastructure and cover about a third of the estimated private sector funding gap.
- Priority sectors… The plan prioritizes the development of blended-finance strategies for resilient cities and sustainable land-use—two high-impact sectors that don’t fit into typical asset allocations and have non-traditional business models—by boosting the percentage of green bond targeting each, for example.
- Broad support… HSBC, Credit Suisse, Aviva, Investec, Allianz, EBRD, the International Finance Corp. and the Rockefeller Foundation are all on board for the 12-18 month plan.