|
||
|
TWN
Info Service on Biodiversity and Traditional Knowledge (Aug23/03) Blended finance – a problematic approach to biodiversity finance In recent years, an argument has pervaded that public resources are insufficient to achieve critical environmental aims; therefore, private, return-seeking capital must be attracted to fill the gaps. As such, numerous multilateral development banks and Global North countries have adopted and promoted ‘blended finance’ structures as key parts of their policy toolkits, in effect using public resources to ‘catalyze’ or ‘leverage’ private investment to achieve public policy priorities. These subsidies to private capital include a variety of tools to make investments in public projects more attractive. First loss guarantees, credit enhancements and structured loans all fall under the umbrella of blended finance. Ultimately, the aim of these ‘innovations’ is to make investment in large-scale environmental projects less risky or more profitable for private investors. This approach to environmental finance has become normalised over the past 15 years. So much so that the concept of leveraging private finance and promoting blended finance is included in Target 19 of the Kunming-Montreal Global Biodiversity Framework (KMGBF), which aims to increase financial resources for biodiversity action. This is also reflected in the strategy for resource mobilization for the KMGBF. A Briefing Paper, ‘Blended Finance’ published by the Climate and Community Project, highlights some of the problems with the approach. In the first place, there is a shift from the legally binding obligations of the North to provide finance, to using public resources to ‘catalyze’ private investment. Beyond conceptual concerns, the key problem with blended finance rests with outcomes; the success of blended finance projects is typically measured by the volume of private capital ‘mobilized’ as a multiplier of the initial public investment (otherwise known as ‘de-risking’). But for all the talk about mobilizing private investment, the World Bank Group managed to leverage just $0.25 of private investment for every dollar of public money deployed for climate change objectives. Coupled with the time taken to organise these deals, and the fact that most environmental finance is distributed as loans, it’s hard to see blended finance as a meaningful solution to the complex structural dimensions of the ecological crisis. In particular, biodiversity has proven particularly challenging to achieve ‘investability’ or profitability. As with other public policy aims, investors’ wish to shoehorn returns into environmental protection is at best inappropriate, and at worst destructive. With
best wishes,
|
||
