While impact investors strive for a double bottom line, many sustainable development challenges require the development of complex and unproven technologies that are less viable to deploy commercially or at scale. This is where different forms of capital such as philanthropic capital can contribute.
Philanthropies have distinct risk absorption capacities to invest in nascent and disruptive technologies. Shifting from traditional ‘chequebook philanthropy’ towards viewing philanthropy as risk or catalytic capital can further drive the development of upstream solutions that achieve impact outcomes, instead of only treating consequences downstream.
The blended financing approach supports collective action among different types of investors with its collaborative framework. It leverages philanthropic and development capital as risk capital to mobilise additional commercial capital to address pressing issues not yet ready for commercial investments. Blended financing remains under-utilised today. More can be done by all sectors, together, to mobilise the capital required to address the SDG funding gap.
These different types of investors can reference impact measurement and management toolkits as they come together to contribute risk capital that drives innovative solutions. Clear criteria, measurable goals, and consistent tracking will contribute towards more successful impact outcomes.