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The Investor Leadership Network (ILN) has released a new report, entitled ‘Investing in Emerging and Frontier Economies: How Blended Finance can make the most of public funding’.

Natixis Investment Managers, a member of the ILN, contributed to the report with Laura Kaliszewski, Senior ESG Officer at Natixis Investment Managers, who provided specific thought leadership to the ILN on the role of blended finance in sustainable investing.

Combating Climate Change and Meeting the SDGs
The ILN was launched at the 2018 G7 Summit to facilitate and accelerate collaboration by leading global investors on key issues related to sustainability and long-term growth.

As the leading network of investors taking action for people, planet and prosperity, the CEO-led group is composed of 14 global institutional investors representative of six countries, with over US$9 trillion in assets under management.

Combating climate change and achieving the United Nations Sustainable Development Goals (SDGs) require vast investment in sustainable projects in developing countries, but the world is falling short: estimates suggest that a whopping $6 trillion a year is needed to fully meet the SDGs.

One of the ILNs key pillars is bridging the infrastructure gap by promoting a mutual understanding between emerging market infrastructure planning public-sector officials and developed market investors.

Tactical Measures to Unlock Private Capital
The report recommends seven specific actions that the blended finance community can take to reduce risk and increase sustainable investments in emerging and frontier economies. These are tactical measures that can be implemented in the short, medium, and long term to unlock the flow of much needed private capital.

Essentially, it asks public sector actors – multilateral development banks, governments, and foundations – to change the way they involve the private sector in financing global sustainable development.

Furthermore, this blueprint will be used to inform the ILN’s 2021 G20 and COP26 discussions, which will likely result in an implementation plan for 2022 and beyond.

A Powerful Public-Private Combination
Blended finance uses public funds or government support to encourage private investment, the result of which can finance projects or businesses that, under normal circumstances, would be considered ‘un-investable’.

Governments effectively provide a safety net – their co-investments and guarantees unlock private investment by lowering risk or enhancing returns and, in many ways, transform the ‘un-investable’ into the ‘investable’. But government financing also provides time for investments to build a proper track record – to prove they can deliver not only positive social or environmental impact, but also the profits, cash flow or dividends that investors depend on for returns.

Blended finance deals usually build in impact measurement from the start. The International Finance Corporation’s (IFC) Operating Principles for Impact Management offer a good framework in this respect. Once a track record is established, the need for public funds diminishes, or disappears altogether. Investors can analyse performance and assess risk, just as they would with more conventional financing.

In developing countries, blended finance can reduce reliance on overseas aid or philanthropy. Pooling resources means more investment at scale. Most importantly, money goes to the areas that need it most: to help in the fight against climate change and biodiversity loss, and to build better, more sustainable livelihoods for local communities.

The ILN’s report is an open resource and is available to view and download here: https://investorleadershipnetwork.org/en/resource/blended-finance-blueprint-executive-summary/

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About the Investor Leadership Network
The Investor Leadership Network was launched at the 2018 G7 to facilitate and accelerate collaboration by leading global investors on key issues related to sustainability and long-term growth. As the leading network of investors taking action for people, planet and prosperity, the CEO-led group is composed of 14 global institutional investors representative of all continents and assets classes, with over US$9 trillion in assets under management. Learn more about the Investor Leadership Network by visiting our website and following us on Twitter @ILNinfo

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This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material.

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