How blended finance can speed up net zero targets, MAS exec explains

Blended finance combines public and private capital to fund marginally bankable projects.

Monetary Authority of Singapore Managing Director Ravi Menon underscored the need for blended finance to help speed up sustainability targets or net-zero transition.

In a speech before the public at the inaugural Transition Finance Towards Net Zero: Scaling Blended Finance Conference, Menon identified blended finance as a way to coordinate public and private capital to “deploy financing for projects that are marginally bankable.” 

“It is also about combining financing with capacity building, technology transfer, and institutional support, to reduce risk and enhance bankability,” Menon added.

Whilst the strategy is not fresh, Menon said the catalysing of blended finance and scaling it requires a modified approach.

“Globally, annual flows of blended finance have averaged less than US$10 billion since 2015. We need a more systematic and coordinated approach to mainstream blended finance,” he told the audience.

Menon said there must be a pipeline of shovel-ready transition projects.

“This is specially so in emerging markets, where regulatory and political risks heighten the likelihood of default, transaction lead times are long, projects require prohibitively large amounts of start-up capital, and there is limited access to expertise in project development and financing,” said the central bank official.

There must be reduced risks in marginally bankable transition projects to attract private capital, said Menon. 

“To reduce overall risk and improve bankability, we need more catalytic and concessional funding from the public sector, multilateral development banks, and philanthropic sources,” he pointed out.