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In philanthropy today, few terms carry the potential, or complexity, of blended finance – a financial structuring approach which melds public or philanthropic funds with private capital. Its aim is to help de-risk or improve the returns of ventures that straddle profit and purpose, thereby drawing in additional capital and amplifying the change achieved.
Part of the attraction lies in its potential scale. It’s estimated that $1.3tn in money and time is donated by individuals globally each year,1 but this is dwarfed by the value of global investable assets, which stood at $247tn at the end of 2024.2 Blended finance offers a mechanism to tap into this pool, aligning profit motives with environmental and social goals. “Blended finance structures help us to draw in additional private capital, enhancing the impact of the initial philanthropic funding, and increasing the chance of catalysing solutions that are scalable and sustainable,” says Tom Hall, Head of Social Impact at UBS and CEO of the UBS Optimus Foundation network.
Over the past decade, the approach has mobilised over $200bn3 toward sustainable development. But the appeal goes beyond simple funding. By bridging the gap between altruism and profit, blended finance can unite diverse entities and skillsets, while expanding the range of investable projects. Philanthropic capital can be offered on concessional terms, to help derisk or improve the returns of a project or product to catalyse additional private investment.
An alternative is the use of credit-enhancing guarantees, creating additional protection for private investors and lowering the cost of capital. In some cases, blended finance might involve a technical assistance facility that strengthens commercial viability and development impact. In others it can consist of grant-based funding that seeds an enterprise through the early, riskiest stage, getting it to a point where it is attractive to private capital.
Whatever its exact form, blended finance leverages one of philanthropy’s key characteristics – patience. For example, the Accelerate the Future initiative supplies early-stage funding to social and environmental ventures, like Kreedo, an education solution provider in India. This was supported through a mixture of grants and equity investments starting with a $275,000 grant in 2020. This helped it build the 4–5 year track record required to draw in capital at a higher scale, which came in the form of a $4mn Series A funding round in 2024.
Three priorities for best practice
To amplify the reach and effectiveness of blended finance, three priorities stand out, beginning with partnerships. One example is the SDG Outcomes Fund, which finances outcomes-based contracts – still a relatively new instrument in the blended finance space – where payments are based on verified results, e.g. number of children educated, or health outcomes improved. Alongside the UBS Optimus Foundation, lead investors include British International Investment and several family offices, with Bridges Outcomes Partnerships serving as manager. Governments also play a key role, too, where they have the potential to boost projects with subsidies or co-investment. The Outcomes Accelerator, for example, launched with the support from the UK and Swiss governments, helps promising outcomes-based programmes to get off the ground and scale.
Second, prioritise transparency and accountability. These principles provide clients with information about the impact of the projects they invest in, while also contributing to the further development of the impact market. Achieving this requires credible metrics and, ideally, standardised impact frameworks that measure everything from carbon reductions to jobs created. Nalini Tarakeshwar, Head of Programmes and Impact Transparency at the UBS Optimus Foundation, explains: “In 2023, we developed our own industry-aligned impact rating tool that aims to assess programmes against three impact categories: intentionality, additionality and measurability. It is now an integral aspect of our grant and investment selection and management processes.”
Third, push the boundaries of capital structuring. Tools like guarantees, insurance or tech-driven platforms can stretch catalytic capital further to help attract more private funds. Such structures can bring different types of stakeholders and investors together. In the case of the SDG Outcomes Fund, a $20mn philanthropic tranche helped to mobilise a further $80mn from commercial investors.4 “We chose to contribute to both the philanthropic and investment tranches,” says Bryan Goh, CEO of the Tsao Family Office. “We wanted to fully participate in the blended finance structure … Part of the appeal was joining a range of like-minded people, coming together to use their capital for impact outcomes.”
The future of philanthropy in blended finance
By its nature, blended finance applies to projects that generate revenue streams and therefore returns. This has the benefit of allowing them to become self-sustaining, but it also rules out non-revenue-generating projects. It complements, rather than replaces, traditional grant-making, targeting sectors where markets can amplify reach. Blended finance flows reached a 5-year high of $23bn in 2023, according to Convergence’s State of Blended Finance 2025 report, with preliminary data for 2024 indicating continuing strength the following year. The growing volume of blended finance suggests that philanthropists have an as-yet under-utilised catalytic power.
Now, perhaps more than ever, increasing the value-for-money achieved by philanthropic capital is critical, both to strengthening impact and keeping donations flowing. Philanthropists and investors have an opportunity to blend profit with purpose, deploying blended finance as an enabler, amplifier and connector, and as a key part of philanthropy’s future.
Footnotes:
1. CitiGroup, (2024), Global Giving: Generosity and the Economics of Philanthropy
2. Ocorian, (2025), Value of global assets hits record
3. Convergence Finance [accessed June 2025]
4. Impact Investor, (2025), SDG Outcomes Fund closes at $100m with EU backing
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