Policy and regulatory support
Blended finance cannot reach its full potential without a strong enabling environment. We need clear and consistent policy signals, long-term certainty for investors, supportive legal and regulatory frameworks, flexibility in public procurement and tax incentives that encourage participation. Policy that recognises the role of blended finance can help unlock new opportunities for collaboration and investment.
State of play
National governments and international institutions play a critical role in creating the certainty needed for private and philanthropic investors to engage at scale. Many markets still lack the policy clarity or coordination required for blended finance to function effectively.
Core enablers of progress
Embed blended finance in long-term investment strategies: Integrate blended finance as a standard tool for national, regional and local policymakers, deploying it strategically where it can unlock additional investment to deliver positive outcomes.
Provide long-term clarity through policy and guarantees: Use policy guarantees, mandates and long-term commitments to reduce perceived risk for investors and signal government confidence in blended finance as a market development tool.
Update fiscal and regulatory frameworks: Adapt financial rules, procurement processes and approval systems so that blended finance tools can be used more flexibly and effectively. Update regulations to make it easier for institutional investors, like insurers and pension funds, to participate in blended structures, supported by well-designed incentives.
Strengthen coordination across government and public bodies: Improve communication and collaboration between policy teams, regulators and delivery bodies to identify shared priorities, share data and reduce duplication. Coordination across fiscal policy, flexible procurement rules and long-term budget planning are essential levers that will ensure that blended finance activity is coherent and complementary.
Promote blended finance across all levels of government: Build understanding of blended finance among central government, devolved administrations, combined authorities, local delivery bodies and public finance institutions. Where relevant, encourage its use to unlock innovation in place-based strategies.
Align with policy priorities: Target blended finance towards initiatives that deliver long-term public benefit in areas such as health, housing, nature recovery and net zero. Encourage public, philanthropic and private actors to co-invest in these priorities to achieve systemic impact.
Momentum in the market
Access – The Foundation for Social Investment established to strengthen the UK’s social investment ecosystem by blending public, philanthropic and private capital. Access provides a practical example of how targeted policy and institutional support can build an enabling environment for blended finance.
The UK continues to play a leading role internationally through British International Investment, while new institutions such as the National Wealth Fund, Great British Energy, and the British Business Bank are exploring ways to embed blended finance in national investment strategies.
European Union – InvestEU Fund combines guarantees and policy windows to mobilise over €370 billion in public and private investment, illustrating how coordinated EU policy can scale blended finance.
IFC advisory support provides technical and regulatory advice to governments on creating the legal and institutional frameworks needed for blended finance to thrive.
UNDP Africa Sustainable Finance Hub provides advisory support and capacity-building for governments across Africa, helping countries such as Tanzania develop national blended finance strategies and sustainable finance regulations.
Convergence: Private Investment Mobilization Project insights work identifies policy and regulatory conditions that either enable or hinder blended finance, helping governments and DFIs design more effective interventions.