When blended finance 

For institutional investors, the most interesting question around blended finance is no longer simply how it can channel capital into emerging and frontier markets, but how it can evolve as those markets deepen, diversify and attract broader investor attention. Over the coming decades, these markets will become increasingly difficult to overlook. An IMF report projects that Africa will be home to a quarter of the world’s population within the next 25 years, and around 40% by the end of the century.  

Against this backdrop, what began as a catalytic model is increasingly demonstrating the capacity to do more: to support scale, create more investable pathways into impact-oriented assets, and encourage the structural creativity needed for different forms of capital to work in sequence rather than in isolation. For long-term institutional investors seeking diversified private market exposure with credible sustainability characteristics, that evolution matters. It suggests that blended finance is not merely a tool for market access, but a flexible framework capable of adapting as emerging markets and investor expectations become more sophisticated.

Finance in Motion’s new debt issuance platform is one example of how that evolution may begin to take shape. At its core, the model creates a route for selected mature assets from impact portfolios to be transferred into a format more readily accessible to institutional investors. In its inaugural transaction, L&G acquired an asset via Texel through an insurance structure, illustrating how institutional capital can be matched with impact exposures once they have reached a level of maturity suited to a broader pool of institutional investors. The significance lies less in the mechanics of the transaction than in what they make possible: a clearer bridge between catalytic origination and institutional balance sheets.

What makes that development notable is the way it broadens the role blended finance can play over time. Public and concessional capital remain essential in opening markets, supporting early momentum and helping establish the conditions for private capital. Yet their contribution need not end there. Structures that create a pathway for mature assets to reach institutional investors show how blended finance can also support capital recycling, portfolio evolution and a more dynamic allocation of resources across the investment lifecycle. Rather than pointing to a narrow or finite model, this suggests something more adaptive: an approach in which catalytic capital helps shape opportunities, while private capital can participate more fully as assets mature. For institutional investors, that is where blended finance begins to resemble not just a specialist market mechanism, but a more creative and scalable architecture for larger pools of institutional capital.

This is particularly relevant for insurers and other liability-driven investors, for whom the investability of emerging-market and impact-oriented assets often depends as much on structure as on underlying fundamentals. Recent transactions involving L&G and Texel have shown how insurance-based credit enhancement can help institutional investors access opportunities in emerging markets with investment-grade characteristics. Applied to impact portfolios, similar structures could widen the opportunity set for institutional investors that have historically found such assets difficult to accommodate within regulatory, capital or risk frameworks. In other words, the innovation is not only about impact delivery; it is about converting bespoke cross-border credit agreements into a form institutional capital can hold.

The wider implication is that blended finance may be entering a more expansive phase. Structures such as this help shift the market from a model centered purely on mobilization towards one that also supports evolution, distribution and greater institutional participation. That does not diminish the importance of catalytic capital; rather, it underlines its strategic value by showing how it can unlock successive waves of investment over time. For investors, the appeal lies in access to differentiated private market exposure aligned with long-term sustainability themes, but in a format better suited to the realities of institutional portfolio construction. For the market, the larger promise is that blended finance can become not only catalytic, but also a platform for scale, adaptability, and financial innovation.

Authored by: Luke Franson, Director of FX/Treasury

About the author:
Luke Franson is the Director of FX/Treasury at Finance in Motion and has over 20 years of experience in Treasury and Capital Markets.