Impact Finance Bulletin: Blended finance works – but its key ingredient is in short supply
Access's independent review praises the organisation but points to a familiar challenge: in the UK, like elsewhere, new sources of catalytic capital are needed. Can Access succeed in mobilising the funding needed in the long term? Laura Joffre introduces this month's digest of impact investing news and analysis.
Blended finance works. Structuring deals that blend cheaper, high-risk money (including grants) with market-rate investments has proven successful in reaching underserved markets or impact organisations otherwise unable to access finance. (That it struggles to scale is a different story).
This week’s glowing review of Access, the Foundation for Social Investment, the UK’s blended finance ‘wholesaler’, is the latest demonstration of how blended structures can enable social investment to reach those that need it most – something the sector has long been criticised for failing to do.
The review also points to a challenge: the need for subsidised investment is unlikely to end any time soon. But the key ingredient for it is in short supply.
We’ve seen this elsewhere in the world: blended finance has been powerful to drive investment in developing countries, but an essential source of catalytic capital until now – development aid – is being cut dramatically. In the UK, much of the subsidy funding provided by Access has come from dormant assets, but recent delays and disappointments in how much of it was allocated to social investment made it clear it can’t be relied upon as a secure source of money in the future.
So everyone is looking for new sources of catalytic capital. Philanthropy – in the UK and globally – seems like an obvious partner but it would need a big mindset shift (‘Why would I subsidise someone else’s profit?’ is a common reaction) and the sums mobilised might not be enough.
Bringing together a multitude of actors will be necessary. In the UK, Access stands in a good position to make this happen. The review highlights the huge respect that the team has earned with stakeholders – both by demonstrating expertise and building trust – and it has become much more than an asset allocator, taking the role of advocate, convener and innovator. The organisation is currently developing a ‘mobilisation strategy’, precisely to find those new sources of capital. The review says it will be a ‘sector-shaping’ task. No pressure, but if it succeeds, blended finance practitioners around the world will be eager to learn.
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On our radar
I’ll be out and about in the UK in February, first at the Business and Finance Day organised by Aviva in Manchester next week, a side event of the IPBES‑12 conference focused on unlocking finance for nature (read our feature to find out why it’s a hot topic right now), and on 11 February at the Beacon Forum in London, organised by NPC, which promises a keynote speech by impact investing’s friend in government, Darren Jones. Come and say hi if you’re attending too!
A big publication expected next month is a mapping of the UK’s impact economy by NPC. The report is already expected to become a reference, and it could be very influential in the approach of the newly-launched Office of the Impact Economy.
(Have some off-the-record leads or tips you'd like to share? Let's have a chat.)
Top image: Freepik.
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