Blended finance in practice: insights from our research

How is blended finance applied today and what can we learn from it? With these questions, we conducted a survey of the blended finance market. We are happy to share a summary of the survey, including practical insights on the effective use of blended finance instruments for transition and innovation goals.

Blended finance is the smart combination of public funds with private investments in businesses or projects with social value. By deploying public capital as subordinate loans or first loss equity, risky but promising innovations become financeable for private investors. Think for example of the growth of start-ups and scale-ups working on solutions for the energy transition, circular economy, or sustainable agriculture, which carry many uncertainties.

The 2024 Budget Memorandum announced that Invest-NL will have € 250 million available from 2026 to scale up blended finance activities. This provides a significant boost to our role as impact investor. In line with our vision document (which can be found here) and our related cooperation agreement on blended finance with the Ministry of Economic Affairs, we wanted to better understand how blended finance is currently being applied (in the Netherlands and abroad) and what we can learn from it.

Our exploration is based on three components:

a literature review and analysis of available data,
market consultations with funds and financiers domestically and internationally,
insights from practical cases.

We examined in which sectors and growth phases blended finance is most applied, which instruments are most effective, how much private capital is mobilised by blended finance, and to what extent the capital is revolvable — in other words: flows back and can be used again. Our main lessons:

data on blended finance is primarily available for transactions in developing countries,
blended finance is so far mainly used in the energy and agri-food sectors,
mobilised (private) capital through a blended finance transaction ranges between 0.3-12x,
relatively larger transactions (>€ 100 million) and guarantee products mobilise relatively more capital,
loans and guarantees are the most used instruments according to available data.

The research shows that blended finance works, but also that tailor-made solutions are essential. There is no “one size fits all” solution. The deployment of instruments varies across sectors, stages, and investor types. At the same time, based on the available data, it is clear where the most leverage occurs and which approach works best to enable the scaling of innovations.