Blended Finance focuses on structuring risk-tiered vehicles where commercial investors take a senior position. These vehicles co-invest alongside Development Finance Institutions in high impact emerging markets loans. The highly diversified loan portfolios, combined with the first loss protection at a vehicle level, means commercial investors’ participation in the vehicle can be akin to investment grade.
The value proposition
Through partnerships with Development Finance Institutions, investors access a new set of investments traditionally funded by development capital. Historically the investments have yielded stable returns as a result of prudent structuring and the halo effect of development banks. These returns have tended to have a low correlation to public emerging markets bond indices.
$4.2 trillion of additional annual global investment is needed to achieve the SDGs. Through blending and de-risking, commercial investors are able to allocate significant amount of capital towards sizable vehicles.
By blending public and philanthropic capital together with commercial capital into risk-tiered structures, the goal is to achieve an attractive risk-return profile for all stakeholders.
Blended investments focus on sectors with the highest impact on social and economic growth such as infrastructure, energy and agribusiness.
IFC Case Study
(For illustrative purposes only. This information contained herein is solely for educational purposes and should
not be relied upon as a forecast, research or investment advice and is not a recommendation to adopt any
investment strategy. Any vehicle mentioned herein is closed for external investors.)
Benefits to Allianz investors
The Partnership allows Allianz investors to leverage the IFC’s track record, local presence, halo effect, and impact investment expertise. In addition, the first loss de-risks the senior investment to achieve investment grade characteristics and increases its capital efficiency compared to single direct loans, which enables Allianz investors’ commitment to a large scalable vehicle.
Benefits to IFC, SIDA and target emerging markets
The Partnership achieves significant commercial capital mobilization, which is a key goal for public capital and Development Finance Institutions, and it is targeted towards much needed, high impact infrastructure projects.
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