SCALED blended finance initiative BOX 12 The Scaling Capital for Sustainable Development (SCALED) blended finance initiative, launched as a multi-stakeholder effort at the 2024 Hamburg Sustainability Conference, focuses on mobilizing large-scale private investment for climate solutions and SDGs in emerging markets. By simplifying, standardizing and scaling-up blended finance strategies including project aggregation and streamlining due diligence, SCALED aims to facilitate capital flow into renewables, nature-based projects and social impact investments. The initiative is supported by the governments of Canada, Denmark, France, Germany, United Kingdom and South Africa, alongside private investors including Allianz SE, AXA SA, La Caisse and Zurich Insurance Group. It targets global markets eligible for Overseas Development Assistance (ODA), multiple SDG- related sectors and is targeting several billion Euros in private capital mobilization within its first decade.70 Nearly 30% of investors surveyed cited lack of standardized risk mitigation mechanisms, including blended finance, as a barrier. Nearly half of all respondents said they have never participated in blended finance transactions. Some MDBs have MoUs to streamline due diligence, but more coordination is needed, aligned with the recommendation on blended finance standardization in Brazil’s B20 Finance & Infrastructure Policy Paper.69 To address the currently high transaction costs of structuring risk-sharing mechanisms, the Scaling Capital for Sustainable Development (SCALED) blended finance initiative was launched to streamline this process (see Box 12). Building on SCALED, governments, private investors and MDBs could also co-fund the development of an AI-enabled platform that aggregates and automates access to risk-sharing instruments from DFIs, MDBs, national governments and guarantee agencies, including clear eligibility criteria, application processes, templates and timelines. At its core, an AI matching engine would pair investors and project developers with suitable risk-mitigation tools based on project details, risk profiles and financing needs such as guarantees and first-loss tranches. The platform would also feature an interactive due diligence assistant to streamline application preparation, a timeline tracker to coordinate MDB and investor processes and a data hub to share anonymized case studies and identify emerging financing trends. 65 This can increase transparency, reduce transaction costs and accelerate climate finance flows. However, participants in the study also noted solutions must be tailored to investor types and country contexts. While parts of transactions can be standardized, they remain subject to operational realities. One investor noted blended finance is not a panacea – it is useful when returns are low and risk is high, but it cannot solve structural or political issues, such as contract enforceability.Create an AI-powered climate finance platform to streamline access to de-risking mechanisms MDBs and DFIs Donor governments SOLUTIONS: SHORT-TERM 34 From Risk to Reward: Unlocking Private Capital for Climate and Growth

Risk to Reward 2025