Blended finance deals in East Asia and the Pacific hit US$4.4 billion in 2025

[SINGAPORE] Blended finance deals in East Asia and the Pacific, which includes South-east Asia, increased to US$4.4 billion in 2025 from US$3.5 billion the year before, blended-finance organisation Convergence said.

In a report released on Wednesday (Oct 7), it noted, however, that the region accounted for only 8 per cent of the total blended finance transactions for the year, down from 13 per cent in the year before.

Across the globe, blended finance remained steady at US$25.8 billion in 2025, just slightly higher than US$25.7 billion in 2024.

This was despite major declines in official development assistance and decades-low private-sector investment in low-income emerging and developing economies, noted the report.

It suggested that official development assistance from members of the Organisation for Economic Co-operation and Development allocated to blended finance, which was relatively protected from cuts, along with an overall increase in private-sector financing, helped cushion the market from record-breaking aid cuts.

Blended finance is a capital-raising approach that essentially relies on investors with higher risk appetites, such as multilateral development banks, development finance institutions, philanthropists and governments, to provide concessional or catalytic capital to pull in more commercial investors.

It has emerged as one of the key mechanisms to mobilise capital for climate projects that are not unbankable, but are deemed to be environmentally and socially important.

The report said that climate finance expanded its share of market activity, increasing by more than 6 per cent to US$1.2 billion.

Within climate finance, adaptation financing – funds for projects aimed at helping society prepare better for, and reduce vulnerabilities to, climate impacts – more than doubled, rising by 133 per cent to US$5.6 billion in 2025 from US$2.4 billion the preceding year.

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Climate mitigation, which refers to measures aimed at reducing greenhouse gas emissions, continued to attract the largest share of financing at US$9.9 billion, although this was a 26 per cent decline from 2024.

Private sector commitments rose 27 per cent to US$11.2 billion from US$8.8 billion over the same period, with most of it coming from commercial banks.

“This growth was supported by increased use of risk-sharing agreements providing credit protection to domestic banks in developing countries,” said the report.

Leverage reached a record high in 2025, with each dollar of concessional capital supporting US$5.33 in total commercial financing. This was higher than in 2024, when US$4.14 was mobilised for every dollar of concessional capital.

“The increase partly reflects the greater use of guarantees, which can enable larger volumes of commercial financing relative to concessional capital deployed by mitigating specific risks rather than directly funding a larger share of the transaction,” read the report.

While private-sector commitments in blended activities went up, most of the capital was allocated to middle-income markets with stronger enabling environments.

Deals targeting low-income countries accounted for around 13 per cent of blended-finance activity, broadly in line with 2024.

Sub-Saharan Africa, the region that typically receives the highest amount of blended finance, has been overtaken by Eastern Europe and Central Asia.