Blended Finance
Blended finance---the use of public and philanthropic funding to crowd in private capital---is a potential way to finance a more sustainable world. While blended finance holds the promise of being catalytic in mobilizing vast amounts of private capital, little is known about this practice. In this paper, Dr. Flammer, Thomas Giroux and Geoffrey M. Heal provide a conceptual framework that formalizes the decision-making of development finance institutions (DFIs) that engage in blended finance. They then provide empirical evidence on blended finance using data from a major DFI. The key variable they studied is the level of concessionality, which captures the subsidy from the blended co-investment. Their findings indicate that DFIs provide higher concessionality for projects that have a higher sustainability impact per dollar invested. Moreover, the concessionality is higher for projects in countries with higher political risk and a higher degree of information asymmetries. In such cases, the blending tends to also include risk-management provisions. These findings are consistent with the predictions from their conceptual framework, in which DFIs have a limited budget that is allocated across projects to create societal value.
Dr. Caroline Flammer - Bio
Focus areas: climate change, corporate governance, corporate social responsibility, ESG, impact investing, innovation, strategy, sustainable finance
Caroline Flammer is the A. Barton Hepburn Professor of Economics at Columbia University with joint appointments at the School of International and Public Affairs (SIPA) and the Climate School, and a secondary appointment at Columbia Business School. She currently serves as the Vice Dean for Research and Faculty Affairs at SIPA. Caroline is also a Research Associate at the National Bureau of Economic Research (NBER), a Research Fellow at the Center for Economic Policy Research (CEPR), and a Research Member at the European Corporate Governance Institute (ECGI). She is an expert in sustainable investing and the recipient of numerous prestigious awards. Her research examines whether and how sustainable finance and impact investing can help finance a more sustainable world. Moreover, her research examines how, and under which conditions, firms can incorporate environmental, social, and governance (ESG) considerations into their activities to enhance their competitiveness while strengthening—instead of undermining—the very system in which they operate and hereby play a critical role in addressing climate change, inequality, global health, and other grand challenges related to society and the natural environment. The Web of Science ranked her among the top-100 Highly Cited Researchers in the economics and business profession in terms of impact over the past 10 years. At Columbia, she serves as the Director of SIPA’s Sustainable Investing Research Initiative (SIRI) which aims to foster scholarship, education, and dialogue on system-level investing—the interplay and interdependencies between investment and major challenges such as climate change, biodiversity loss, poverty, and social inequalities. Among other roles, Caroline serves as the President of the Alliance for Research on Corporate Sustainability (ARCS), a global multi-disciplinary network of scholars fostering rigorous academic research on corporate sustainability, as a Council Member of the World Economic Forum (WEF)’s Global Future Council on the future of responsible investing, and as a Trustee at Domini Impact Investments. She also serves as Department Editor at Management Science.
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