Turning challenges into opportunities: the role of hybrid finance in the era of sustainability
With the intensification of the effects of the climate crisis, such as the environmental tragedy in Rio Grande do Sul, or the historic drought that devastated the Amazon in 2023, debates on how companies can be allies in transformation have gained strength. In this catastrophic scenario, the need for innovative and resilient approaches to face these challenges becomes even more relevant. That's where the call comes in blended finance.
What is blended finance?
Also known as hybrid finance or mixed financing, is an investment strategy that combines different types of capital, with independent return objectives and different risk tolerances, which can be, for example: public + private capital; two formats of private capital; philanthropic + public capital? ?. Its objective is to finance initiatives that generate a positive social, environmental or economic development impact. This modality stands out, mainly, for contributing to the reach of SDGs (UN Sustainable Development Goals), established by the UN, to fulfill the Agenda 2030.
Why should companies align themselves with the SDGs?
The SDGs represent an ambitious global challenge, aiming to resolve a range of crucial issues, ranging from climate change to eradicating poverty and hunger. In Brazil, with so many problems to be resolved, blended finance initiatives find fertile ground. This is because ESG has long ceased to be an option, and has become a decisive criterion for many investors and consumers. But is ESG without generating a positive impact enough? No!
In 2019, during the World Economic Forum, the UN released an estimate indicating that the investments needed to achieve the SDGs were in the range of US$ 5 to US$ 7 trillion annually, which equates to just 1% to 2% of total global financial assets. At this rate, experts point out that the 2030 sustainable development agenda will only be achieved in 2086. But we need solutions now! Therefore, it is essential that companies create quick solutions to resolve and mitigate current and future challenges.
How can companies contribute to the 2030 Agenda?
A promising solution is the blended finance. To finance sustainable development and financial solutions in line with the UN 2030 agenda, these structures adopt the strategic use of catalytic capital to mitigate the risk of impact projects and attract commercial capital. In this way, does each actor contribute the type of capital they have/can and receive what is important to them? be it impact, financial return or a mix of both.
But the main challenge in directing these investments towards the SDGs is balancing the relationship between risk and return in order to attract private capital and maximize impact.
To this end, with more than 15 years of experience, Sitawi has developed an innovative approach that, based on mixed financing, promotes the development of organizations impact first, enables attractive financial returns for investors and helps companies to align themselves with the ESG agenda, with proven impact.
Given the urgency to resolve the challenges we face, it is essential that companies engage in innovative and effective initiatives to mitigate problems and build a more sustainable future. Do you want to know how your company can promote positive impact through blended finance? Contact us! We are ready to offer attractive solutions that align with your goals and values.
