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Cambridge Institute for Sustainability Leadership (CISL)

10 July 2025 – Despite the promise of blended finance to mobilise private capital in emerging markets and developing economies (EMDEs) at scale, persistent risk perceptions, ecosystem fragmentation, and structural barriers continue to hinder scale. This practitioner-led report distils insights from key stakeholders to unpack the current perceptions of risks and highlight actionable pathways to unlock private investment. The findings underscore the need for coordinated efforts to improve data, market infrastructure, and policy alignment across the blended finance ecosystem.

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Blended finance has long been positioned as a catalytic mechanism to mobilise private capital for sustainable development in emerging markets and developing economies (EMDEs). However, despite growing momentum, private capital mobilisation has remained insufficient to meet global climate and development targets. Misperceptions around risks in EMDEs, fragmented ecosystems and structural inefficiencies continue to constrain private capital, while the urgency for action continues to rise exponentially.

This report takes a practitioner-led approach to unpack these barriers and identify enablers for scale. Through three closed-door workshops, CISL engaged stakeholders across the blended finance ecosystem, including multilateral development banks (MDBs), development finance institutions (DFIs), banks, institutional investors, insurance companies, credit rating agencies and guarantee providers. The discussions focused on unpacking real and perceived risks in EMDEs – contextualising existing literature in this space, identifying practical bottlenecks, capturing evidence-based insights and identifying pathways for impact.

The key findings from the research are summarised below, contrasting some of the recurring challenges in blended finance with promising emerging practices in the field. Reflecting an increasing need for a co-ordinated approach to scale, these findings indicate a growing momentum in the market to address challenges in risk perceptions and unlock greater volumes of private capital across EMDEs. 

However, realising the full potential of blended finance will require continued effort. Strengthening market infrastructure, enhancing local capacity, addressing data gaps in risk assessment, aligning policy and investment mandates and promoting standardisation emerge as critical priorities to accelerate private capital mobilisation at scale.

 

 

Citing this report 

Mani, Trisha; Sekaringtias, Annisa (2025). Beyond the Myths: From Perceptions to Practice in Scaling Blended Finance to EMDEs. Cambridge, UK: Cambridge Institute for Sustainability Leadership.

Published: July 2025

Authors and acknowledgements

Lead authors:

Trisha Mani and Annisa Sekaringtias

Acknowledgements:

Dr Nina Seega and Elizabeth Clark

Additional Contributions:

We would like to acknowledge the commitment and meaningful participation of members of CISL leadership groups (Banking Environment Initiative, Investment Leaders Group and ClimateWise) in the workshops conducted to develop and pressure-test the research findings and recommendations. We would also like to thank the European Climate Foundation for funding this research. 

External speakers:

Aicha Zakraoui and Hakim Khelifa (AfricInvest), Ashish Kumar (Climate & Impact Investment Practitioner), Peter Munro (European Investment Bank, in a personal capacity), Sibusiso Nkomo (CISL South Africa), Uzoma Okoro (Development Guarantee Group)

External reviewers:

Ana M Camelo Vega (Columbia Center on Sustainable Investment), Beth Burks (S&P Global Ratings), Brishni Mukhopadhyay (CISL Senior Associate), Christoph Baumann-Kesten, Laurence Opie (Development Guarantee Group), Peter Munro (European Investment Bank, in a personal capacity)

Copyright

Copyright © 2025 University of Cambridge Institute for Sustainability Leadership (CISL). Some rights reserved. The material featured in this publication is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike

4.0 International Licence (CC BY-NC-SA 4.0).

Disclaimer

The opinions expressed here are those of the authors and do not represent an official position of CISL, the University of Cambridge, or any of its individual business partners or clients. This study has been supported by the European Climate Foundation. Responsibility for the information and views set out in this report lie with the authors. The European Climate Foundation cannot be held responsible for any use which may be made of the information contained or expressed therein.