First In, Many Follow: How Foundations are Anchoring the Next Wave of Blended Finance

The challenges are familiar. Commercial investors point to a lack of pipeline and a scarcity of well-structured blended finance deals in which they can participate.

Philanthropies cite three main concerns: their capital being treated as “dumb money,” being consistently asked to boost commercial returns, and impact being treated as an afterthought.

Impact, additionality, and leverage expectations are misaligned across various foundations. The session ends with commercial and concessional capital providers pointing fingers at one another, each waiting for the other to move first.

The outcome: despite broad agreement that more blended finance is needed, multiple transactions in the market fail to attract commercial capital, concessional capital, or either—and fail to address the fundamental differences between these groups of capital providers.

This is not a new dynamic: it has been eleven years since the term “blended finance” was coined, and fifteen years since CrossBoundary structured its first blended finance deal. Yet the core issues various classes of investors raise today are strikingly similar to those raised then. Now, in a world of shrinking ODA, it is more important than ever for philanthropies to step in and fill the gap that has been created in impact sectors.

In this white paper, we unpack a simple construct of blended finance for philanthropies and aim to address some of the critical constraints in the field through a simplified, intuitive framework that we often apply in practice as blended finance practitioners.

Download the white paper