The international experts of the One Planet Lab, the think tank of the One Planet Summit, publish recommendations on blended finance for scaling up climate and nature investments. Their report has been launched at COP26 in Glasgow on 3 November 2021. It argues that the world needs a tectonic shift in investment and finance to tackle the climate crisis and biodiversity loss, and a new paradigm for the public private partnership to accompany the ecological transition
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Glasgow, 3 November, 2021
The One Planet lab, the One Planet Summit’s own think tank, published on 3 November 2021 a report on “Blended finance for scaling up climate and nature investments” which provides strategic guidance on increasing private investment contributing to ecological transition.
The science is increasingly clearer: to address the scale of the global challenges posed inter alia by poverty, climate change and biodiversity loss, exacerbated themselves by inequalities or by the COVID pandemic.
Yet despite years of experimentations and lessons learned, only a fraction of the massive private investments needed for a climate smart and nature positive economy have materialized, most of it considered too risky.
We have to redirect all possible investments massively towards sustainability, we need to shift the trillions for the ecological transition.
Blended finance is not a new instrument in this regard, it is the deployment of concessional public money to de-risk and mobilize more private finance towards investments that are compatible with public policy objectives, for example the fight against climate change and biodiversity loss, that could be not made possible without public intervention.
The report of the One Planet Lab examines why and how to do this.
It argues that there are enough blended finance success stories and material to draw lessons from. The interest and feasibility of scaling up blended finance is confirmed, it’s time to walk the talk.
It presents a number of promising blended finance initiatives, including some developed under the auspices of the One Planet Summit, each addressing specific gaps in the financial architecture.
Risk sharing mechanisms including blended finance are essential to the new form of public-private partnership, which combine financial returns with global impacts and which must be scaled up and become the new normal rather than experiments. There is both urgency and considerable potential for an expanded use of blended finance.
In order to make the biggest impact, the report suggest how blended finance can overcome the three main impediments to greater private investment in climate and nature projects: 1) faulty policy environments, 2) insufficient project preparation capabilities, and 3) a risk-driven disconnect between projects and financial markets;
The report proposes different approaches between blended finance for impact through pioneering investments – for instance in nature-based solutions – and blended finance for scale to enable mainstream renewable energy and other systemic change programmes.
These forms of blended finance can make better sense, including economic sense, if subject to disciplined governance and impact, additionality and efficiency tests, with increased transparency to increase trust between partners.
Indeed, blended finance can only be scaled up if we face major misconceptions, some of them deeply rooted in our political economic and social history, about the ultimate compatibility of public and private interests.
The report also advices that, together with the mobilisation of public and private funds generally, blended finance should be coordinated through country platforms that include and consult the private sector and national banking partners.
Also, blended finance should overcome barriers to scale by moving from individually tailored to portfolio approaches, in order to benefit from aggregation with lower transaction costs and increased standardisation.
Bertrand Badré, CEO of Blue Like An Orange Sustainable Capital who as guarantor of the One Planet Lab oversaw the preparation of the report, commented: “The good news is that after much experimentation and innovation in the blended finance area in recent years there is broad agreement on solutions for scaling up. We now need to build on that – it is time to act on the sustainable finance model of the future.”
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The full report can be downloaded from the One Planet Summit website here.
It has been drafted for the One Planet Lab by Hans-Peter Lankes, Visiting Professor in Practice at the London School of Economics and Political Science’s Grantham Research Institute on Climate Change and the Environment.