Blended finance deals focused on climate solutions experienced a significant decline of 55% in 2022, according to the latest report from Convergence. The report highlights the urgent need for concrete action in the face of the escalating climate crisis. Blended finance, which combines public or philanthropic capital with private sector investment, plays a crucial role in mobilising funds for sustainable development. However, the report reveals a 45% drop in overall blended finance deal volume, with climate-focused deals experiencing an even steeper decline. Private sector investment in climate solutions also decreased, emphasizing the need for increased mobilization of private capital. The report emphasizes the importance of efficiently deploying concessional capital, which is provided on below-market terms, to maximize its impact. The International Energy Agency estimates that over $1tn per year must be invested in emerging markets by 2030 to achieve net zero emissions by 2050. However, the report highlights that emerging markets alone cannot meet these investment needs and calls for greater private sector involvement. The decline in blended finance deals raises concerns about the effectiveness of this financing approach and the need to address the most challenging issues with limited concessional capital. As the climate crisis intensifies, it is crucial to take bold and ambitious steps to mobilize private investment at scale into climate solutions tailored to the unique challenges faced by developing economies.
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