Blended Finance Lab

Mobilising private capital for climate and development

The Blended Finance Lab, based at CETEx, is focused on addressing the institutional, market and policy constraints that continue to limit the mobilisation of private capital for climate action and sustainable development, particularly in emerging markets and developing economies (EMDEs).

While blended finance has become a central feature of international discussions on development and climate finance, progress in mobilising private investment at scale has remained limited and uneven. The Lab was established to respond to this gap between stated ambition and observed outcomes.

The Lab works with policymakers, development banks and development finance institutions, investors, academia and civil society to strengthen the evidence base for blended finance and to support the wider adoption and more effective use of blended finance instruments.

Our approach

The Lab works at the intersection of academic research, practitioner experience and public policy to diagnose the real barriers to investment in blended finance. We challenge mispriced or misunderstood risks, test assumptions against evidence, and design practical solutions to address constraints, enabling public finance and policy to mobilise private capital more effectively.

The Lab tackles these challenges through:

Focused engagement with practitioners and policymakers
Bringing together development finance institutions, investors, governments and civil society to work through specific challenges in blended finance, with an emphasis on diagnosing constraints and identifying and implementing practical solutions.
Empirical research and analysis
Undertaking and supporting research that strengthens the empirical foundations of debates on risk, return and investment performance in EMDEs.
Policy development and engagement
Developing policy-relevant proposals informed by research and consultation and engaging with decision-makers at national and international levels.
Coordination and education
Contributing to greater coherence across the blended finance ecosystem, and supporting teaching and capacity-building where this can add practical value.

Workstreams

The Lab brings together key stakeholders, rigorous evidence and critical analysis to stress-test what works, challenge established assumptions and direct insight and support where they are most needed. The Lab’s current work is focused on three challenges facing the effective deployment of blended finance at scale:

Workstream 1: Addressing the data barrier to investment in EMDEs
Weak and inconsistent data on emerging market assets remains to be one of the most persistent barriers to institutional investment in these countries. This workstream carries out rigorous research and analysis and convenes practitioners and experts to tackle this data gap. It examines what data is missing, why it matters, and how improved transparency and standardisation can build investor confidence and unlock greater capital flows into emerging markets.
To learn more, contact Fernanda Gimenes: F.Sousa-Gimenes@lse.ac.uk

Workstream 2: Facilitating credit ratings for blended finance
Credit ratings are a gateway to mainstream institutional capital, yet blended finance vehicles remain under-rated or unrated. This workstream brings together credit rating agencies, private investors and public finance institutions to explore practical pathways towards more accessible, fit-for-purpose credit ratings, ultimately working to reduce a critical structural barrier to scaling up blended finance investments.
To learn more, contact Mohammed Saffar: M.Saffar@lse.ac.uk

Workstream 3: Enabling institutional asset owner allocation to blended finance
Pension funds, insurers and sovereign wealth funds hold the capital needed to drive sustainable development at scale, but they face real barriers to allocating it to blended finance investments. This workstream convenes asset owners, asset managers and partners such as investment consultants to work through the practical constraints in mandates, regulation, risk perception and portfolio fit, and to identify concrete steps that can shift institutional capital towards blended finance.
To learn more, contact Harald Walkate: H.Walkate@lse.ac.uk

Stakeholder groups

The Lab organises its activities through targeted stakeholder groups and collaborative spaces that convene practitioners from different parts of the blended finance ecosystem. Where issues cut across multiple stakeholder groups, the Lab also convenes cross-cutting groups to examine specific questions and advance work in a more integrated way.

Asset owners
This workstream convenes representatives from pension funds, insurers and sovereign wealth funds to explore how institutional capital can better engage with blended finance. Participants discuss practical issues like risk and ratings, regulation, mandates and asset allocation, and collaborate with peers and other ecosystem actors to identify solutions that could help direct more capital towards sustainable and impactful investments.

Asset managers and banks
This workstream brings together professionals from investment firms and banks to explore how blended finance can be scaled up within mainstream financial markets. Participants discuss practical challenges like standardisation, structuring deals and ensuring liquidity, and collaborate with development banks, policymakers and others to design solutions that make blended finance more accessible and effective.

Development finance institutions (DFIs) and multilateral development banks (MDBs)
This workstream convenes representatives from DFIs and MDBs to explore how their capital and mandates can be better used to mobilise private investment. Discussions focus on practical ways to scale blended finance through risk-sharing tools like guarantees and first-loss capital, improved coordination, and a shift from ‘investing directly’ to enabling markets.

Governments
This workstream engages policymakers, public officials and regulators to discuss how laws, incentives and financial architecture can support the scaling up of blended finance. Topics include regulatory barriers, fiscal tools, MDBs’ mandates, and how governments can design smarter interventions to crowd in private capital.

NGOs and foundations
This workstream brings together non-governmental organisations (NGOs), foundations and philanthropic organisations to explore how their resources (capital, technical assistance, networks) can unlock greater private investment in sustainable development. Participants share experiences, identify where their interventions can have catalytic effects and collaborate with other actors to strengthen the enabling environment for blended finance.

The figure below outlines the relationship between our workstreams and stakeholder groups, and how they interact.