Pressures on development progress are growing, and public development co-operation budgets face increasing constraints. Recognising these challenges, at the Fourth International Conference on Financing for Development (FFD4) in Sevilla, countries emphasised the need for more, high-quality private capital flows aligned with sustainable development goals. One key tool to advance this objective is blended finance.
Since their adoption in 2017, the OECD Development Assistance Committee Blended Finance Principles have provided an internationally recognised framework for policymakers and practitioners. They helped establish a common understanding of the key elements of high-quality blended finance – emphasising additionality, transparency and alignment with partner country priorities. The Principles, and the related 2020 Guidance for their implementation, have supported a broad range of actors in launching and structuring more effective and impactful blended finance operations.
Blended finance is now a core element of international development co-operation, yet there are barriers that prevent it from reaching its full potential. Many transactions remain too complex, narrowly defined or small in scale to drive systemic change. Challenges with impact measurement, transparency and local ownership continue to limit the wider and more effective use of blended finance.
The updated OECD Development Assistance Committee Blended Finance Guidance aims to respond to those challenges. It builds on practical experience and good practice to offer a more focused, action‑oriented tool for policymakers, development finance providers and other actors in blended finance. It responds to the call of the Sevilla Commitment for blended finance structures to be more effective, scalable and impact driven.
The update bridges the gap between private investor interest, the financing needs of low‑ and middle‑income countries and the capabilities required by development finance providers to design and implement high-quality blended finance solutions at scale. Private investors can make important contributions to effectively implementing the updated Guidance, for example by contributing to increased transparency on financial risk and project viability in emerging economies and by engaging with policymakers to tackle regulatory frameworks that disproportionately increase the cost of capital in these countries.
This updated OECD Development Assistance Committee Blended Finance Guidance will support development finance providers, policymakers and private investors in enhancing the quality, scale and impact of blended finance, ultimately helping deliver effective, sustainable development outcomes for emerging markets and developing economies.
Mathias Cormann
Secretary General, OECD
Carsten Staur
Chair, OECD DAC