Climate change is posing a real threat to the livelihoods of countries and communities in the global south. This includes climate-induced indebtedness, which impacts negatively on the ability of countries to deliver public services, such as access to affordable and clean drinking water during and after a climate extreme event. Despite having contributed the least to causing climate change, the global south is disproportionately impacted. Therefore, it needs access to high quality climate finance that is in line with ‘Common But Differentiated Responsibilities and Respective Capabilities’ (CBDR-RC), as is enshrined in the United Nations Framework Convention on Climate Change (UNFCCC). This finance is needed to implement mitigation and adaptation measures and to address ongoing loss and damage. It is vital for countries in the global north to demonstrate their commitment to ensuring that all nations have the financial means to implement climate measures. 

Blended finance – broadly defined as the combination of public concessional finance (finance with more generous terms than the market has to offer) with private or public resources – is often portrayed as a key financing mechanism to deliver the resources needed to fight climate change. However, the evidence base to support this is still very small. In the absence of any case studies where blended climate finance has had a positive impact on the local economy, communities and their environment, this briefing focuses on two high profile projects which have had negative impacts. They are the South Africa’s Just Energy Transition Partnership (JETP), and the IFC Scaling Solar Programme in Zambia. 

Both of the projects are financed by the World Bank Group, but they are also two separate approaches to clean investment in climate (solar power and decarbonisation). Both demonstrate the need for caution in using blended finance for climate action because in each example the risks have been borne by recipient countries and their citizens. They are complex projects that have to be understood in the context of national and international political economy dynamics, and they also reflect problems associated with the governance of infrastructure more broadly, including lack of transparency and democratic accountability. Although we do not intend to extrapolate these problems to other projects and contexts, we do aim to illustrate some of the risks facing blended finance projects. 

Click here to read the full report "Blended finance for climate action: good value for money?"