Blended finance held steady in 2024, but could suffer impact from USAID shutdown: report | News | Eco-Business

The total value of transactions last year reached US$18.3 billion across 123 deals, down slightly from the record-breaking US$23.1 billion in 2023, based on data from global blended finance network Convergence. However, this deal volume still exceeded the five-year average of US$17 billion – a sign of resilience even as development assistance budgets shrank.

Joan Larrea, chief executive of the Canada-based network, said she is “pleasantly surprised” at how the number has held steady. “Blended finance is the confluence of a couple of capital flows – one is private capital while the other is catalytic capital from development aid and philanthropic money. None of those were positive in 2024,” she told Eco-Business. 

However, the dismantling of USAID – which leads other donor agencies in terms of the number of concessional contributions – could have spillover effects, especially in Africa where it has been the most active in blended finance deals, said the analysis by Convergence. It has not seen any transactions being halted due to the withdrawal of USAID so far but anticipates a drop in blended finance volumes. 

Over the last three years, USAID has made 72 commitments totalling US$107 million. Over 70 per cent of these commitments were directed towards the agriculture sector, followed by the financial services sector. 

Larrea noted that USAID – which plays an active role in development finance – was not the largest player in terms of actual volumes committed to blended finance, though it did play a catalytic role in providing early-stage support. Its contributions to blended finance pales in comparison to other countries like Japan, Germany and the United Kingdom, she said. 

The hit would therefore not be “existential”, she added, as long as there is continued support from other major donors such as Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), Japan International Cooperation Agency (JICA) and the UK’s Foreign Commonwealth and Development Office (FCDO). 

JICA alone deployed US$1.8 billion in concessional investments over the past three years, mainly targeting energy and financial services. Australia, meanwhile, has maintained a steady, though less high-profile, presence in Asia Pacific.

USAID made the most number of blended finance commitments among development agencies and multi-donor funds between 2022 and 2024. Image: Convergence’s State of Blended Finance 2025

Larrea also highlighted the emergence of non-traditional donors, like the United Arab Emirates and Singapore, as well as philanthropic organisations – though to a lesser extent – as a potential silver lining. 

“It would be remiss of me if I didn’t mention Singapore,” said Larrea, citing the city-state’s blended finance initiative, Financing Asia’s Transition Partnership (FAST-P), which aims to mobilise US$5 billion from public, private and philanthropic sources to accelerate the region’s clean energy transition. “I expect Singapore to really step up,” she said.

Earlier this month, the country’s central bank chief announced that a FAST-P office with a dedicated management team would be set up to deploy up to US$500 million of concessional capital from the Singapore government.

Some recent blended finance transactions in Asia Pacific that USAID has supported are the Sustainable Access to Markets and Resources for Innovative Delivery of Healthcare (Samridh) initiative, to strengthen India’s healthcare system, and Green Invest Asia, which focuses on promoting sustainable land use practices in Southeast Asia. 

USAID’s departure would leave a gap in de-risking tools, like investment-stage grants, technical assistance and concessional guarantees, said Ilsa Weinstein-Wright, a senior associate at Convergence and co-author of the report. “We are going to need other actors to step up and fill that space.”

Philanthropic foundations have typically been a small part of blended finance activity and their contributions shrank from 6 per cent of total investor commitments in 2022 to 3 per cent in 2024. 

Over the past three years, Global Energy Alliance for People and Planet (GEAPP) has led philanthropic contributions, with five commitments totalling US$9 million, followed the Visa Foundation and UBS Optimus Foundation, with commitments amounting to US$8 million and US$6 million respectively.

While philanthropies remain important early movers in high-risk transactions, they are unlikely to match the shortfall in development aid in the near-term, said Larrea.

“I don’t expect foundations to suddenly blossom as the leading source of catalytic money from blended finance. They will continue to be important, but I wouldn’t anticipate a bump up in the dollars,” she said.

Greater private sector buy-in

Despite the dip in blended finance volumes, deal sizes are trending upwards, with the median size rising to US$65 million in 2024, up from US$38 billion between 2020 and 2023, according to the report. 

Climate continues to dominate the blended finance market, accounting for over half of all transactions over the past decade and 62 per cent of total financing. Funds are emerging as the most scalable blended finance vehicles for private sector mobilisation, with institutional investors like Temasek, GIC and Caisse de dépôt et placement du Québec (CDPQ) anchoring large-scale funds such as Brookfield Asset Management’s Catalytic Transition Fund, which has reached an initial close of US$2.4 billion.

The report noted three so-called “whale” deals, or transactions that exceeded US$1 billion, including Brookfield’s fund, which focuses on clean energy and transition assets across emerging markets, the TPG Global South Initiative targeting East Asia, and a major infrastructure project in West Africa.  

While this marked a decline from the seven “whale” deals in 2023, the report’s authors flagged that there are others in the pipeline that have yet to reach a financial close, and will likely only be fully reflected in its dataset later this year. 

Institutional investor participation has also increased in these deals, which is important for closing the sustainable development goals funding gap, Ishwari Sawant, a senior associate at Convergence said at the report’s launch. “Whale” deals are unlikely to be affected by the development aid cuts as well, since they require less concessional capital to mobilise more private capital, she added.

Private investors contributed US$6.9 billion in commercial capital in 2024, outpacing development finance institutions and multilateral development banks for the first time. Each dollar of concessional capital attracted US$3.76 in commercial capital, rising to US$5.46 for larger deals above US$100 million. Bigger transactions predominately target the energy sector, followed by the infrastructure sector, the report stated.

The majority of top private investors are financial institutions, with Japanese megabank SMBC leading with 13 commitments between 2022 and 2024, followed by MUFG with eight commitments. 

The decline in development aid from both the US and Europe will mean each public dollar needs to be used more catalytically to crowd in private capital, said Robin Ivory, a manager at Convergence. She foresees donor countries increasingly prioritising near bankable deals, rather than pilot transactions.

“Aid may become more conditional upon the benefits to the donor countries. Over time, we may see more blended finance transactions that help the official development assistance country’s own investors enter new markets, or provide access to strategic resources,” said Ivory. “But with these challenges, we also think that blended finance is becoming more strategic and efficient. This might be the push that we need for blended finance to scale.”

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