How can innovation turn Development Finance into a new asset class?
Blended finance has a critical role to play in mobilizing private capital to address the growing Sustainable Development Goals (SDGs) investment gap in emerging markets. Large-scale investments continue to face significant barriers, particularly in climate, energy and natural capital. To help overcome them, Societe Generale has consistently supported innovative financing tools and collaborative approaches that can deploy impact solutions at scale while mobilizing private investors.
By Marie-Aimée Boury, Head of Impact Based Finance, and Aurélie Coulin, Sustainability and Impact Advisory at Societe Generale.
Emerging Markets and Developing Economies: an untapped potential
Emerging Markets and Developing Economies (EMDEs) are home to around 85% of the world’s population.(1) Since 2000, they have generated approximately 60% of annual global growth and, in 2025, accounted for 61% of global GDP,(2) compared with 25% in 2000.(3) Yet institutional allocations to EMDEs remain limited, typically representing less than 15% of investors’ total assets under management.(4) Emerging markets also account for only 11% of the MSCI All Country World Index, which reflects the size of the global equity market.(5)
This persistent under-allocation contributes to a significant SDG investment gap, estimated at approximately USD 4 trillion per year in EMDEs.(6)(7) The slow response to this market failure highlights the urgent need for blended finance to unlock more private capital for the emerging development finance asset class.
Doing more with less
Blended finance combines concessional and commercial sources of capital to attract private investors to projects that would not otherwise be investable without a de-risking mechanism.
By aligning the impact mandates of public and philanthropic funds with the risk-return expectations of private investors, blended finance can mobilize private funding at scale for high-impact projects, particularly in EMDEs.
Headwinds and persistent structural barriers
In 2025, blended finance flows represented less than 1% of the approximately USD 4 trillion annual SDG investment gap. At the same time, the already limited pool of de-risking capital is shrinking as Official Development Assistance budgets from donor countries fell by 25% in 2026 compared with 2024.(8)
Time is another major challenge. Arrangers of blended finance transactions typically spend years identifying and securing funding from catalytic and private parties, while SDG financing gaps continue to grow and require action at a much faster pace.
In addition, structural barriers persist and constrain private investments in EMDEs:
- Risk: perceived risks and regulatory constraints discourage investments, despite blended finance structure’s ability to create investment grade(9) opportunities.
- Liquidity: medium to long investment horizons and limited exit options restrict investor participation, outlining the need for liquidity-enhancing solutions to tap a larger investor pool.
- Pipeline: a fragmented and non-standardized project pipeline limits scale and efficiency, highlighting the importance of aggregation vehicles and diversified investment platforms.
In response to these challenges, Societe Generale has committed resources and played a catalytic role in developing innovative solutions that can make blended finance more accessible, systematic and scalable.
Co-creating a catalyst for private sector mobilization
To improve access to catalytic capital, a coalition of private financiers convened by the Institut de la Finance Durable and Boston Consulting Group and led by Societe Generale proposed the creation of a Catalytic Capital Repository (CCR).
Designed as a free and publicly accessible platform, the CCR aims to make catalytic capital and risk-mitigation instruments easier to find, compare and access. Private investors can use the platform to identify de-risking partners and structure transactions or funds in EMDEs with a risk-return profile aligned with their regulatory and fiduciary constraints.
Supported by GFANZ and hosted by the Global Capacity Building Coalition, the CCR was launched at COP31 with an initial cohort of more than 30 providers.
By consolidating information on catalytic capital into a single source, the CCR will improve transparency and comparability, hopefully leading to optimization of public and philanthropic resources allocation to increase mobilization ratios. In other words, it can help achieve more with less. The platform should also support the standardization of catalytic instruments, an essential step towards creating a large and liquid development finance asset class.
The CCR will work alongside other initiatives, including SCALED, the Catalytic Capital Consortium and Private Investments Mobilization Models. Genuine collaboration between these initiatives is essential, as they share the same goal: to channel private sector funding into EMDEs at an unprecedented scale and pace.
I am excited to see the CCR finally released as a new tool enabling our clients to expand their investments in EMDEs, and very proud that Societe Generale has played a leading role in supporting the creation of this unique tool from the outset.
Supporting a groundbreaking liquidity instrument for private investment in EMDEs
To address its clients’ liquidity needs, Societe Generale actively contributed to the successful closing of the Octobre Liquidity Guarantee Facility (OLGF). The Bank structured a EUR 108 million medium-term credit facility backed by a first demand guarantee from the European Commission under the EFSD+ program.
OLGF provides the first-ever liquidity guarantee for investors in private impact funds focused on EMDEs, as well as for the asset managers of these funds. The facility was co-founded by Octobre, Innpact and Cardano Development, three highly experienced and reputable organizations.
Together, they created OLGF to offer tailored liquidity solutions that allow private investors to exit positions in illiquid emerging-market private impact funds.
OLGF’s product is designed to meet the liquidity requirements of a broader range of investors allocating capital to sustainable and impact funds focused on EMDEs, as well as the managers of those funds.
When the guarantees it has provided are called, OLGF relies on a robust capital structure supported by highly rated funders. These include, among others, OLGF’s founders, the Moore Foundation, the European Commission and Societe Generale.
In the short term, OLGF aims to support the mobilization of more than EUR 1 billion into EMDEs, equivalent to five times its concessional capital. In the coming years, the objective is to increase this amount to EUR 15 billion while reducing the facility’s reliance on concessional capital.
Through OLGF, private investors have access to a new tool that can help them invest more efficiently, or even for the first time, in the fast-growing development finance asset class.
By enabling private investors to exit illiquid funds at any time, OLGF has the potential to attract new pools of investors into EM impact strategies and contribute to bridge the USD 4 trillion SDG investment gap.
Bringing stakeholders together through blended finance and impact forums
Societe Generale also plays an active role by bringing together impact pioneers and sharing best practices to attract more investors to blended finance and development finance.
In April 2026, Societe Generale organized its Blended Finance and Impact Conference in New York for the second consecutive year, jointly with AllianceBernstein and the Emerging Market Investors Alliance.
The event brought together more than 200 stakeholders, including investors, multilateral development banks, insurance companies, corporates, peer institutions, project developers and non-governmental organizations. Speakers presented successful country platforms, including Brazil BIP, which mobilized USD 2.1 billion between 2024 and 2026. They also shared their experience of closing large blended finance funds. The event explored the emerging natural capital asset class, with participants presenting new insurance solutions and sharing insights into the due diligence and impact frameworks needed to build investor confidence and streamline investment decisions.
A new market to address an existential threat
Financing sustainable projects in EMDEs is imperative if humanity is to remain within our planetary boundaries and contribute to resolve the current polycrises undermining our societies.
Blended finance creates a conducive pathway for mobilizing the necessary capital, but both the scale and pace of investment must increase exponentially. Innovative instruments such as the CCR and the Octobre Liquidity Guarantee Facility can play a pivotal role by unlocking additional private capital for high impact projects and companies in EMDEs. By supporting these solutions, Societe Generale acts as a catalyst to grow a new asset class, development finance, that provides investors with diversification, decorrelation from listed markets and an attractive combination of risk, return and impact performance.
(1) IMF.
(2) IMF, World Economic Outlook, October 2025: Global Economy in Flux, Prospects Remain Dim. World Economic Outlook, October 2025
(3) World Bank, Policy Research Working Paper 11169, From Tailwinds to Headwinds: Emerging and Developing Economies in the 21st Century, July 2025. World Bank document
(4) Attridge, S., Getzel, B. and Gregory, N. (2024), Trillions or billions? Reassessing the potential for European institutional investment in emerging markets and developing economies, ODI Working Paper, London: ODI. ODI publication
(5) AllianceBernstein, Emerging Markets’ Power and Potential Is Lost in Equity Allocations
(6) UNCTAD, World Investment Report 2024: Investment Facilitation and Digital Government
(7) United Nations Sustainable Development Group, Developing Countries Face Staggering USD 4 Trillion Investment Gap in SDGs, July 2023.
(8) OECD statistics.
(9) The “investment grade” notation refers to a credit rating that indicates a relatively low risk of default. It is assigned by rating agencies to entities or financial instruments that are considered financially stable and reliable.
Blended finance has a critical role to play in mobilizing private capital to address the growing Sustainable Development...
Swift may have postponed its original November 14, 2026 deadline structured address data changes but corporates still...
Offering a full range of finance and advisory services supported by a strong sectorial expertise.
Rwanda recently completed two milestone blended finance operations supported by the World Bank Group. Societe Generale...
By Raphael Vialat, Head of Sustainability and Impact Advisory, Asia Pacific at Societe Generale