The case for blended finance (and how to actually implement it)
Here’s a note from Gillian Marcelle in response to BlackRock’s Larry Fink’s op-ed in the NY Times entitled “Rich Countries Must Bear the Cost if We Can Ever Hope to Achieve a Net-Zero World“:
I wrote a joint post with Harald Walkate in response to Larry Fink’s recent essay in the The New York Times. We think this is a key moment for the world, which can be used to acknowledge the need for #blendedfinance (“BF”) and find ways of actually *doing* it, rather than pointing out the need for it. Help us send a message to asset management CEOs so that they contribute to building a BF marketplace: please like, comment or share and spread the word!
Dear Larry (and other AM CEOs),
Thank you for your article. What you are saying, in simple terms, is this:
– To reach net zero we need massive investment
– Much of that investment needs to go to poor countries
– Governments don’t have those funds, at least not at scale
– Private sector investors have lots of capital, but not enough is deployed in climate-related projects or EM, presumably because potential investments don’t meet risk/return requirements
– Therefore: governments and private capital can work together to allocate capital by having public finance provide grants & subsidies, etc.
What you’ve done is lay out the case for blended finance. While it is important for someone of your stature to do this it’s important to recognize that there is a foundation to build on. DFIs, BF specialists, smart governments with tax incentive programs and philanthropists have been figuring this out.
People sort of know by now that we need BF. What is far more important than pointing it out, is putting in place the structures and facilities to do it at scale.
This is the hard part and this is an area where BlackRock and other asset managers can play a crucial role. Why? Well today not enough BF gets done because your investment teams aren’t actually accessible to those governments, DFIs and others looking for financing.
Instead of stating the obvious in the NYT, we would like to see you and your fellow CEOs making the following pledge.
We commit to:
* ask all of our investment staff (CIOs, PMs, analysts & risk managers) to allocate 1% of their time to BF
* build relationships with government officials, DFI or ECA representatives, or BF specialists, particularly those focused on emerging economies
* stand up joint projects where private firms, incl. investment bankers and lawyers, contribute deal-structuring expertise and work together with expertise from “outside finance” to build a BF market place
* invest in special-purpose BF vehicles to learn by doing and change the practice of an important segment of the financial world
We could call it the “Larry Fink Pledge”. We think that if *you* do this, your fellow CEOs will follow in droves. And this would end up amplifying the message in your NYT essay.
Gillian & Harald