SCALED (formerly known as the Hamburg Sustainability Platform) is an international multi-stakeholder initiative with the aim to mobilise large-scale private investment as a contribution to closing the SDG financing gap in emerging markets and developing economies (EMDEs).
Scaling Capital for Sustainable Development (SCALED)
Abstract
Motivation: Mobilisation of private capital for sustainable investment in emerging markets and developing economies (EMDEs) has fallen short of expectations. Particularly in the context of blended finance, where public capital is used to de-risk and leverage private capital, the necessary scaling is largely not taking place. Private investors cite the need to increase simplicity, efficiency, speed, and volume to scale blended finance transactions.
Challenges: Blended finance vehicles tend to be complex and customised, which makes them cumbersome to set up, replicate, and scale. The time required to set up vehicles often spans several years. At the time vehicles are finalised, the market context may have changed. These conditions reduce their attractiveness to private investors and hinder the development of a diversified and liquid market. Across key stakeholders, the use of language and target setting is very specific for their type of organisation. In addition, the dialogue between stakeholders tends to happen too late, leading to non-value-creating iterative loops, lack of predictability, and eventually the long lead times currently observed in the development of new blended finance vehicles.
SCALED (formerly known as the Hamburg Sustainability Platform) is an international multi-stakeholder initiative with the aim to mobilise large-scale private investment as a contribution to financing the development, climate, and biodiversity goals in EMDEs. SCALED shall overcome structural challenges of blended finance and unleash its full potential for SDG investment.
SCALED was initiated by the Governments of Canada, Denmark, France, Germany, South Africa and the United Kingdom, and the private investors Allianz SE and La Caisse (formerly CDPQ) in October 2024 at the first Hamburg Sustainability Conference (HSC). AXA SA and Zurich Insurance Group joined since then. The OECD and the Inter-American Development Bank (IDB) figure as knowledge partners.
Mission and Approach: SCALED applies a novel approach to address the before-mentioned challenges and to put standardization of blended finance requirements, vehicle types, and processes into practice: it will set up a specialized, first-of-its-kind entity. This service provider shall be dedicated to streamlining the entire development and management process of public-private cooperation for blended finance transactions, especially targeting large institutional investors.
The Entity is foreseen to (a) virtually pool required private and public capital (soft commitments), (b) make use of standardised, pre-configured vehicles, contracts, and reporting, (c) actively facilitate faster and larger first closings of vehicles, for which then (d) adequate managers will be identified who shall manage the investments on the ground and continue to raise funds for the new structures.
Its holistic and modular approach along the entire blended finance development process makes SCALED a unique initiative. It will strategically connect with existing actors and initiatives in the blended finance space and aim to leverage complementarities.
Key features of the Entity will include (i) early public-private target setting and overall private-sector orientation, (ii) standardisation combined with (iii) modularity to allow for sufficient flexibility, and (iv) an active matchmaking and negotiating role towards final closings of vehicles. The early-stage joint target setting between catalytic and commercial investors ensures that the vehicles are geared towards a development rationale, while factoring in commercial interests (OECD Principles 1 & 4).
Standardisation in the context of SCALED includes the harmonisation and simplification of structures, instruments, and processes, e.g., in the areas of capital structures, requirements for the provision of public capital, impact measurement, and reporting. Standardisation allows for an acceleration of procedures and is therefore seen as a decisive step towards scaling private investment (OECD Principle 2). The Entity will be commercially sustainable as it will provide its services against fees to investors. Also, it will advise public investors on additionality and minimum concessionality. Finally, the Entity will support the standardised monitoring and reporting of the vehicles’ performance (OECD Principle 5).
By reducing complexity up- and downstream, SCALED aims at reducing transaction costs, while enhancing simplicity, efficiency, and speed of the process of setting up blended finance structures, making the latter more attractive to all participants and creating the basis for easier replicability and scaling. Thus, SCALED will enable more and large-scale private capital mobilisation and increased volumes of sustainable investment, thereby contributing to closing the SDG financing gap. SCALED generates a quadruple win for public/catalytic investors, private/commercial investors, MDBs and DFIs, and asset managers.
Once the Entity is set up, which is planned for 2025/2026, it will elaborate a global investment strategy and prepare the launch of a series of investment vehicles as well as a set of applied standards and guidelines which can be replicated. Each vehicle will have its own investment strategy (incl. sectoral, thematic, and geographic focus) and aim at specific SDG impact accordingly. Adjustment to the local context (OECD Principle 3), incl. mobilisation of additional capital from local third-party sources, will be the role of each vehicle’s specialised asset manager. SCALED aims to announce its first vehicle in 2026.
Depending on private and public funding commitments, SCALED aims to mobilize several billion USD over the next 10 years.
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