The second annual Blended Finance Lab Symposium, held on 30 September 2026, convened over 100 participants from more than 70 organisations across government, multilateral development banks (MDBs), development finance institutions (DFIs), asset owners, asset managers and banks, NGOs, foundations and academia. The participants explored how greater collaboration can strengthen the blended finance ecosystem and accelerate the mobilisation of private capital for sustainable development in emerging markets and developing economies (EMDEs).
By 2035, EMDEs (excluding China) will collectively require $1.3 trillion in external climate finance each year, half of which must come from private capital. Blended finance can help bridge this gap, but it remains limited in scale: just 123 deals worth a total of US$18 billion were recorded in 2024, with only 8% of mobilised private finance reaching the least developed markets. Given that official development assistance fell by a record 23% in 2025, there is an urgent need to scale up private capital mobilisation. Despite this, blended finance remains a “cottage industry”: fragmented, bespoke, lacking standardisation, and concentrated in larger middle-income markets and a few sectors.
The leading role of guarantees
Guarantees stood out as a widely used and effective way to mobilise private capital. OECD data show that guarantees have mobilised the largest share of private finance since 2012 (when data collection began) and accounted for approximately 30% of mobilised private finance in 2024. For example, the European Bank for Reconstruction and Development has increasingly engaged in risk-sharing in recent years, with guarantees making up nearly half the donor-funded resources it deployed in 2025, most of which was unfunded. Shrinking grant budgets are accelerating this shift.
Guarantees can sit anywhere in the capital structure, and unfunded guarantees generally need provisioning only for expected losses. They can help address both actual and perceived risk, often requiring less concessional support than grants. However, despite their potential, guarantees still face several barriers, including weak incentives for MDBs and DFIs to prioritise private capital mobilisation over lending volumes; a mismatch between investor concerns (which often relate to currency and political risks) and the credit risks most guarantees cover; and limited risk-transfer capacity in higher-risk markets.
Participants called for providers to standardise the terms of guarantees where they cover the same risks in the same markets; scale up existing vehicles instead of launching a multitude of smaller ones; and embed mobilisation targets in MDB shareholder scorecards (institutional tracking tools that measure factors such as financial performance and development impact for accountability to their member governments). Originate-to-share and risk-transfer models have proven effective, shifting the conversation from whether they work to how they can be scaled up. There is now growing interest in making the use of these models standard practice.
Enablers
Technical assistance for blended finance: an underused lever
There was a shared view that technical assistance (TA) is an underused tool that has significant potential when deployed strategically and thoughtfully. TA can help address non-financial barriers such as weak enabling environments, inadequate project pipelines and limited institutional capacity. When TA is deployed midstream (via banks and other intermediaries) or downstream (through transaction support), it reduces execution risk, makes deals legible to investors, lowers transaction costs and strengthens performance after investment. There are three main priorities in efforts to make TA more effective:
- TA should be designed and measured around mobilisation goals and aligned with recipient and investor perspectives, alongside market and donor priorities.
- More funding should support practical business needs, which currently account for less than a quarter of downstream TA. This should cover areas such as legal advice, transaction structuring, credit ratings and investor engagement.
- TA should strengthen local investor capacity and transfer expertise to local advisers to sustain capital mobilisation as concessional funding declines.
Data: unpacking the real meaning of EMDE risk
Emerging research is challenging long-held assumptions about EMDE investment risk, including what it captures, what it overlooks and where the risks really lie. While there is still much to learn, prevailing perceptions may be overstating some risks or misjudging their underlying drivers.
For example, the Global Emerging Markets Risk Database (GEMs) suggests that default rates on MDB and DFI lending in EMDEs are far lower, and recovery rates are far higher, than is commonly assumed. Credit rating agencies’ use of this data is estimated to have created up to $800 billion in additional lending headroom for MDBs and DFIs. CETEx’s forthcoming analysis of the same data shows that credit performance in EMDEs depends on more than income level, with region-specific factors and foreign exchange (FX) volatility also playing a significant role.
Recoveries are equally important in assessing credit risk. Sub-Saharan Africa, for example, has the highest default rate among EMDEs but also the highest recovery rate, highlighting the importance of considering both dimensions when evaluating investment risk, particularly in the context of blended finance.
A growing number of initiatives are working to address significant gaps in assessments of EMDE investment risk, which are particularly apparent in pricing, concessionality and investment returns. These initiatives include efforts to expand public data on MDB and DFI performance, develop new datasets on private sector risk and the cost of capital, and improve coordination and standardisation across reporting initiatives. All such initiatives prioritise more granular data on pricing, concessionality and returns, which would help link performance to how investments are structured, not just where they are made.
Credit ratings: unlocking blended finance at scale
Credit ratings are key to bringing institutional investors into EMDE blended finance transactions at scale. But the relative novelty and complexity of blended finance transactions means they often struggle to secure an optimal credit rating.
More specifically, there is no single rating methodology for blended finance. Credit rating agencies apply different methodologies depending on how a structure is set up, sometimes using several at once, and these methodologies continue to evolve. Recurring challenges to securing a rating include sovereign and FX risks; limited data; diversification in portfolio transactions; liquidity; funding; and the treatment of concessional capital. These challenges are compounded by a limited understanding of which methodologies rating agencies apply and how they do so, and by transactions’ sponsors engaging with rating agencies too late in the process.
Despite these challenges, credit ratings are the “ticket to play” for institutional investment. The examples discussed at the Symposium showed that even portfolios that are perceived as high-risk can achieve strong investment-grade ratings, which act as a stamp of credibility and open the door to much larger pools of capital.
In response to the key challenges associated with securing credit ratings for blended finance, CETEx presented the Credit Ratings Sandbox for blended finance, a pioneering initiative that will convene rating agencies and the sponsors of blended finance transactions, including private financial institutions, DFIs and MDBs. This will involve a series of roundtable discussions that explore, in a structured and educational setting, the key barriers to obtaining a credit rating. The initiative will also produce a series of publications to help further demystify the ratings process for blended finance practitioners, with the first of these expected in early 2027.
Innovation versus standardisation: aligning with asset-owner mandates
Institutional investment in EMDEs remains largely untapped, partly because blended finance is not yet tailored to the requirements and mandates of asset owners. The most persistent tension discussed at the Symposium was between the scale and replicability of blended finance on one side and a continuing appetite for new innovative structures on the other. Investors want products they can buy “with a phone call”, while tailored financial products will be required in the drive for blended finance to provide minimum concessionality and maximum additionality.
In tailoring blended finance investments to asset owners’ requirements, it is important to not only emphasise the impact of such investments but also to ensure that they fall within asset owners’ “investible window”. This requires further work on articulating the portfolio benefits of blended finance, which would enable the blended finance community to engage with asset owners more proactively.
Several practitioners argued that many of the risks discussed above are now known, that financial engineering should no longer be the focus of blended finance, and that sub-scale guarantee vehicles (those that lack the operational scale, capital base or track record required to attract institutional investors) continue to multiply. Other potential areas of focus for standardisation include guarantee terms and pricing, DFI policy requirements, TA reporting, fund documentation and disclosure formats. Practitioners also contended that innovation still matters, especially in areas where no market exists yet. For example, donor-backed war-risk insurance or export credit agency guarantees could combine with concessional finance to fill a critical gap.
The discussion suggested that innovation and standardisation could work together: standardise the routine mechanics of deals and only innovate to address the risks the market cannot yet price, especially those related to currency, politics and regulation.
The future of blended finance: “it takes a village”
Participants agreed that mobilising private capital at scale requires a collective effort: no single actor can do it alone. However, effective collaboration must be underpinned by a market infrastructure that can support and sustain these efforts. If practitioners can get this right, blended finance will transform from a series of one-off deals into a market that works at scale.
Through the Blended Finance Lab, CETEx is contributing to the creation of an enabling infrastructure by addressing the data barriers to EMDE investment, facilitating credit ratings for blended finance, and identifying how blended finance investments can better align with asset owners’ investment mandates.
The Symposium was held under the Chatham House Rule. This summary was prepared by the CETEx Blended Finance Lab team, drawing on insights shared during the Symposium, while maintaining the anonymity of the participants.