The report examines different blended finance instruments and clusters them according to their utility in various contexts. It identifies key questions to ask when selecting a blended finance instrument based on organisational cost and resources, risk and return, and other factors.

In identifying instrument clusters, the report sheds light on the utility of diverse approaches that are currently being used by actors in various sectors. Furthermore, it highlights the importance of stakeholder alignment, technical assistance on the ground, and rigorous impact measurement schemes to mitigate impact risks. For instance, in transactions involving equity and debt instruments, while the investment strategy aims to create impact, the impact is not always measured post-ex, which can lead to mission drift and smaller contributions to impact goals.

The report also provides a framework for practitioners to think about clusters, which makes it easier to differentiate between their different functions and characteristics. This will help practitioners in aligning better with various stakeholders through coherent communication. In addition, the report provides a practical and holistic list of key questions to consider when initiating a blended finance transaction. These factors include organizational factors and purpose, relevant costs and resources, and the investee context.

ESG issues are not a primary focus of the report. However, the report emphasises the importance of a rigorous impact measurement scheme as a key component of blended finance transactions. In this regard, the report suggests using a theory-based impact framework that complements existing impact measurement tools.

Overall, this report provides practical insights and guidelines for practitioners dealing with blended finance instruments, which can be useful when selecting the right instrument based on an organisation’s context and financing requirements.