What will it take to scale impact through Blended Finance?
🌍 So, what will it take? There's been a lot of talk about private capital's role in achieving the SDGs, but how do we make it work in practice?
Here are the key takeaways from our conversation with Bjørg Sandkjær (Former State Secretary, Norwegian Ministry of Foreign Affairs), Arthur Sletteberg (Managing Director, Abler Nordic), and Elisabeth Fosseli Olsen (Ph.D. Researcher, University of Oslo) in our recent webinar with Future Horizons Institute. ⬇️
🔹 Multiplying public funding: As Bjørg Sandkjær pointed out, governments can’t close the SDG gap alone but have a major role to play in de-risking investments and creating bankable projects: “We need to look for good partnerships where we can spend that government financing in a way that leverages private sector finance to help move us all towards the SDGs”
🔹 Don’t dismiss the risks: Perceived risks in emerging markets can sometimes be greater than actual risks. But, as Arthur Sletteberg noted, real risks, like foreign exchange volatility, cannot be ignored. “There are reasons why the private sector is a little reluctant, and we need to understand that and address it, not simply brush it away. We need to provide tangible solutions to the concerns that they have."
🔹 Offer concrete risk-reduction: Arthur shared a great example of how this works in practice at Abler Nordic, with long-term support from the Norwegian Ministry of Foreign Affairs and Norad for Foreign Exchange (FX) and Technical Assistance Facilities, which have been crucial in de-risking private sector investment in Sub-Saharan Africa and Asia.
He also highlighted that Abler Nordic’s FX risks have been managed for over a decade with a minimal realised loss of $16,000 USD, enabling local currency funding to many small financial institutions in developing countries that otherwise wouldn’t have been possible.
🔹 Localization Is Key: Generic, one-size-fits-all approaches often fail, emphasized Elisabeth Fosseli Olsen: "Successful blended finance initiatives need to be localized and driven forward by the people in the country with their knowledge and know-how of their own needs and obstacles."
🔹 Returns do matter: While interest in impact is growing among private investors, fiduciary duties still matter. “Private investors must ensure decent financial returns for clients who’ve entrusted them with their money,” noted Arthur Sletteberg. “One reason we've attracted private sector investment is trust—investors know us and see the results, both financially and in terms of impact."
