Why we blend

“We don't see blending as a goal in itself; it is one of the means to achieve the Paris climate goals and to contribute to the SDGs. With public funding alone, we are simply not going to make it as a world, and neither as the Netherlands.

There’s an increasing interest in creating blended finance instruments amongst many government organisations and donors. Berkvens: “We’re all searching for the best way to shape them. The outcome is strongly connected to internal considerations within a country, what rules and laws they need to adhere to, and the track record that has been built up in the past.

Challenges

The Dutch Fund for Climate and Development originated from the Dutch coalition agreement (2017). Berkvens: “Since the coalition agreement referred to a climate fund that would maximise the return of climate finance, it was clear that we needed to develop an blended finance instrument.” The struggle with designing the DFCD was that we wanted it to mobilize private capital and scale-up existing climate projects, be revolvable* to a certain extent, and also have a huge impact in low-income countries, vulnerable communities and increasing finance in adaptation projects. All in all, it was quite hard to balance these different objectives. First, because there are fewer commercial projects in climate adaptation than, say, renewable energy. That market has already further matured. Secondly because the requirement to make the fund ‘revolvable’ and have it mobilize private capital would create an incentive to move into easier, more commercial projects. That, thirdly, could hinder our goal to make as much of the money available for low-income countries and fragile states. Even though these objectives are not contrasting per se, they do require a careful balancing act.”