Blended finance is the practice of using international development grant funding to encourage international and domestic private investment in projects to address the funding gap needed to achieve the United Nations Sustainable Development Goals (SDGs) in emerging markets and developing countries (EMDCs). This funding gap was estimated in 2014 to be at least $2.5 trillion by 2030, but has increased because of the COVID-19 pandemic.

This Toronto Centre Note provides an overview of blended finance debates, considerations, and issues of interest for EMDC financial supervisors. It examines the constraints on the growth of blended finance in EMDCs including possible regulatory barriers, and it explores the role that supervisors can play in supporting the expansion of blended finance while maintaining the soundness of the financial sector.