Blended Finance

54 Pages Posted: 2 Apr 2024 Last revised: 11 Apr 2024

See all articles by Caroline Flammer

Caroline Flammer

Columbia University; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Thomas Giroux


Geoffrey M. Heal

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 24, 2024


Blended finance---the use of public and philanthropic funding to crowd in private capital---is a potential way to finance a more sustainable world. While blended finance holds the promise of being catalytic in mobilizing vast amounts of private capital, little is known about this practice. In this paper, we provide a conceptual framework that formalizes the decision-making of development finance institutions (DFIs) that engage in blended finance. We then provide empirical evidence on blended finance using data from a major DFI. The key variable we study is the level of concessionality, which captures the subsidy from the blended co-investment. Our findings indicate that DFIs provide higher concessionality for projects that have a higher sustainability impact per dollar invested. Moreover, the concessionality is higher for projects in countries with higher political risk and a higher degree of information asymmetries. In such cases, the blending tends to also include risk-management provisions. These findings are consistent with the predictions from our conceptual framework, in which DFIs have a limited budget that they allocate across projects to create societal value.

Keywords: blended finance, catalytic capital, development finance institutions (DFIs), impact investing, sustainable finance, sustainable development goals (SDGs), public good, public-private partnerships

JEL Classification: F21, G23, H23, H4, H87, O1, P43, P45, Q01, Q14

Suggested Citation

Flammer, Caroline and Giroux, Thomas and Heal, Geoffrey M., Blended Finance (March 24, 2024). European Corporate Governance Institute – Finance Working Paper No. 973/2024, Available at SSRN: or

Caroline Flammer (Contact Author)

Columbia University ( email )

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National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Thomas Giroux

CREST-ENSAE ( email )


Geoffrey M. Heal

Columbia University - Columbia Business School, Finance ( email )

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212-316-9219 (Fax)


National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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