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The Economics of Blended Finance

Author

Listed:
  • Caroline Flammer
  • Thomas Giroux
  • Geoffrey M. Heal

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.

Suggested Citation

  • Caroline Flammer & Thomas Giroux & Geoffrey M. Heal, 2025. "The Economics of Blended Finance," AEA Papers and Proceedings, American Economic Association, vol. 115, pages 397-402, May.
    • Handle: RePEc:aea:apandp:v:115:y:2025:p:397-402
    DOI: 10.1257/pandp.20251072
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    More about this item

    JEL classification:

    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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