Market overview

The report highlights that blended finance demonstrated remarkable resilience in 2025, even as the broader development finance environment deteriorated. While global official development assistance (ODA) recorded its largest annual contraction on record—falling by 23% in real terms or nearly $41 billion—annual blended finance financing remained broadly stable at approximately $25.8 billion. Transaction volumes actually increased by 13%, rising from 160 to 181 deals. This stability was supported by relatively protected ODA allocations to blended structures and a 27% increase in private sector commitments, which reached $11.2 billion. Commercial banks were the primary drivers of this growth, increasing their financing from $4.3 billion to $7 billion.

Leverage and private capital mobilisation rates reached record highs in 2025. Each concessional dollar supported $5.33 in total commercial financing and mobilised $2.57 in private investment. This represents a significant increase from the 2024 mobilisation ratio of 2.16. Climate-focused financing expanded its market share, with climate transactions rising 31% to 123 deals, representing approximately two-thirds of total activity. Adaptation financing more than doubled, increasing 133% to $5.6 billion, marking its strongest annual growth in a decade.

Country, currency, credit, and climate risk

The report identifies four core risks—country, currency, credit, and climate (the 4Cs)—that continue to constrain private investment in emerging markets and developing economies (EMDEs). Country risk remains the primary concern for cross-border investors, often excluding viable investments from portfolios due to sub-investment grade ratings. Currency risk is described as a ubiquitous barrier, with African currencies depreciating 65% against the US dollar between 2007 and 2024. To address these, the report proposes the use of Private Investment Mobilisation Models (PIMMs) to standardise risk-mitigation approaches, such as political risk insurance (PRI) and local currency hedging solutions through providers like TCX.

Credit risk has been the most directly targeted risk in the market to date. The use of guarantees increased significantly, reaching an all-time high of $5.6 billion in 2025. These instruments allow the public sector to absorb defined portions of downside risk, creating space for commercial capital. Climate risk compounds existing issues, particularly for long-duration real assets, as physical and transition risks affect cash flows and valuations. Financing costs for renewable projects in high-risk EMDEs can exceed 16%, compared to less than 6% in advanced economies.

Deal trends

There was a notable shift in investment vehicles and regional patterns in 2025. Blended fund activity fell to a historic low, accounting for just 6% of transactions (10 funds), as managers faced difficult private-market fundraising conditions and a slow pace of exits. Conversely, financial institution transactions rose sharply to account for 52% of all blended finance deals. This indicates a broader shift towards deploying capital at the intermediary level to strengthen lending capacity rather than taking direct exposure to individual project risks.

Regional dynamics also changed significantly. Sub-Saharan Africa was no longer the leading region for blended finance, as its share of transactions fell from 34% in 2024 to 19% in 2025. Meanwhile, Latin America and the Caribbean saw a surge in activity, largely driven by Brazil’s Eco Invest platform. Brazil became the dominant blended finance market in 2025 with 38 transactions totalling $3 billion. The report notes that investments in low-income countries remained low, accounting for approximately 13% of activity, as private investors prioritised lower-risk middle-income markets.

Thematic deep dive: country platforms

Country platforms are examined as a complementary route to scale by addressing systemic constraints that cannot be resolved on a transaction-by-transaction basis. The report showcases three models: SDG Indonesia One (SIO), Brazil’s Climate and Ecological Transformation Investment Platform (BIP) alongside Eco Invest, and Lesotho’s emerging Just Energy Transition (JET) platform. Indonesia’s SIO has mobilised approximately $3 billion in development partner commitments, though only $400 million has been disbursed to date, highlighting the challenge of moving from commitment to project-level execution.

Brazil’s model demonstrates the power of domestic leadership, with the government using its own treasury resources to subsidise private investment. Successive Eco Invest auctions have achieved leverage ratios of 1:5.03. Lesotho’s model is distinctive for its early involvement of private financial actors to ensure bankability during pipeline development. The report emphasises that effective platforms require strong country ownership, focused investment priorities, and dedicated implementation capacity to convert commitments into deployed investment.

Conclusion

The report concludes that while the blended finance market is resilient, it is not yet at the scale required to meet global goals. To reach the Net Zero Emissions (NZE) scenario, annual mobilised private capital in the energy sector must grow more than eightfold, from $49 billion to $423 billion. This requires a transition from treating every transaction as a bespoke exercise towards standardised, scalable models. Strengthening country-led coordination and targeting concessional resources more precisely against specific risks are essential steps to mobilise the vast volumes of private capital needed to close EMDE investment gaps.