Have you heard of the latest trend? Blended Finance. The initial question out of which blended finance emerged is: how do we narrow the 2.5 billion dollar SDG-investment gap and make the best use out of the available billion dollar investment opportunity? While donations continue to make an important contribution to development cooperation, investments in development projects (impact investing) are increasingly attractive. In addition to a certain return, you also achieve a sustainable effect, support a long-term perspective and assume responsibility. WECONNEX is convinced of this promising approach – but to make use of its potential, it is on us to make an effort.
Impact investing means investing money with a positive social impact. Blended finance, in the words of the OECD, is defined as ‘the strategic use of development finance for the mobilization of additional commercial finance towards the Sustainable Development Goals (SDGs).’ This strategic use shall lead to positive results for both investors and communities.
One of the main takeaways in a webinar by Convergence was that we cannot expect this available capital to be acquired by the SDGs itself. We have to go the extra mile to attain that capital. The potential itself is enormous: 12 billion USD of institutional capital are available to be invested in blended finance. More activity is observable in this area than ever before. But, we are not seeing it at the scale and speed of the velocity of change that is needed.
The steps to success
The requirements for the institutional capital to be mobilized are:
1) Real business opportunities. It has to be clear what the opportunity connected to the SDG is and how the investor can be engaged.
2) Potential. The opportunity needs to represent a solution to scale.
3) Reduce complexity. The business opportunities need to be refined in attractive pitches and understandable.
4) Easy accessibility. Blended finance structures are not yet well aligned compared to traditional investment options.
5) Reduce skepticism. A hurdle often encountered is the belief coming from both sides that the ‘NGO- and the investment-world’ do not go well together.
Reality proves different: the orientation of blended finance around the SDGs attracts a lot of attention, because for many it is exciting to think about the impact their money can have on the broader society. Plus, the financial gap is easier to quantify when connected to the SDGs, which makes solving the gap more graspable. Many investors nowadays want the ‘legacy of doing something good in the world’ but they do not know how to do it – that is where we have to step in and offer them opportunities. Overall, we are faced with a win-win situation that we need to make good use of.
Blended Finance and WECONNEX
Most investors want to know where their money is invested into and what impact it has. At WECONNEX, we make sure to follow the advice given above. The triple-bottom line impact is the anchor of all our projects. The SDGs addressed by NEXUS Projects as well as the potential to scale are clear indications of the focus of our initiatives. A monitoring and reporting system allows to draw conclusions and gives a feeling security and control. Furthermore, our project structures are purposely designed to offer attractive investment opportunities.
Our investors are often at the same time our advisors and a good source for feedback. We include them in the process and want them to feel like a part of the project. To all those impact investors out there: we invite you to be part of the WECONNEX vibes, lets team up to reach those SDGs by 2030 together!
Source: nexus ch