Benefits to investment fund managers
Interest in blended finance from global foundations, HNWI’s and family offices, development finance institutions, and corporate foundations.
Infrastructure’s risk/reward/maturity profile is well suited for many types of institutional investors including sovereign wealth funds, insurance companies, and pension funds.
Investment Fund Manager case studies
Africa Agriculture and Trade Investment Fund (AATIF)
Deutsche Bank manages the fund and is a catalytic shareholder
Deutsche Bank Global Commercial Microfinance Consortium 1
Catalytic Capital Investment: $1 million PRI* from MacArthur Foundation; other first-fund investors include Bank of America, Citibank, Deutsche Bank, First Union (now Wells Fargo), MetLife, and MBNA America Bank.
responsAbility Investments AG
Both JP Morgan and JP Morgan Foundation participated
Emerging Africa Infrastructure Fund
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A recent example of a commercial bank’s increasing involvement in development finance is the
, to expand its development-oriented financing activities in emerging markets and galvanize private capital towards the SDGs. Another example is
Top private investors in blended finance transactions
Top private investors in blended finance transactions, according to
Mandate and Appetite for Investment Assets by Investor Segment
Other investment mechanisms
Selection criteria for screening potential partners
Alignment of mission with development impact goals
Steps that prospective investment managers can take
Read Global Impact Investing Network’s (GIIN)
(members include UBP, SBC, Rothschild, RBC Global Asset Management, BMO Global Asset Management, AXA Investment Management, Bain Capital, and ABN AMRO)
Recommendations for scaling blended finance
Focus on portfolio approaches rather than stand-alone projects to mobilize investors at scale. Portfolio approaches are preferred for three key reasons:
Only a small number of stand-alone projects are a suitable ticket size for private investors. Aggregating multiple projects can achieve the required critical mass.
Diversification across projects reduces risk and risk-return variance for investors. Indicatively, the Big 3 rating agencies’ methodologies allow for a two-notch upgrade for diversification across multiple borrowers in Non-Investment Grade Countries – that is, a portfolio of “B” projects can be enhanced to “BB-,” simply through diversification. In countries with very high country risk (e.g. Low-Income Countries), diversification across multiple countries is highly beneficial.
Bundling transactions accelerates taking transactions to market and lowers transaction costs as compared to individual projects.
In a joint paper published in April 2020 by Convergence and UK DFID entitled “
,” we attribute the strong capacity of commercial banks to participate in blended transactions as arrangers and distributors to their ability to leverage expertise which deal originators, institutional investors, and catalytic capital providers can connect. B2T looks to structure impact-agnostic commercial capital and impact-driven concessional capital into replicable institutional-caliber blended finance investment products that solve the climate emergency and other critical development goals. from different divisions (e.g., debt capital markets, asset management, research) and broader global networks and subsidiaries. For example, financial institutions with established networks in developing countries are more familiar with the processes for underwriting and sourcing opportunities in those contexts and are therefore better positioned than their counterparts whose networks remain in developed markets. A recent example of a commercial bank’s increasing involvement in development finance is the
, to expand its development-oriented financing activities in emerging markets and galvanize private capital towards the SDGs.
Additional relevant case studies