Private Capital
The providers of private capital into blended finance transactions are usually investors with more flexibility and a higher risk appetite than institutional investors. This form of capital enables projects to build and scale up.
Private Capital
Private capital plays some important roles in blended finance for the climate transition.
The providers of private capital into blended finance transactions are usually investors with more flexibility and a higher risk appetite than institutional investors. This form of capital enables projects to build and scale up. It can be a bridge between concessional capital and institutional capital. Blended finance aims to match investors’ risk appetites, return expectations, patience, flexibility and impact focus with projects and enterprises at the right time. Private capital can be used in start-up stages (venture capital), but private capital often becomes involved at the building and scaling up stages, when some of the early risks have been tested, managed and mitigated.Private capital is a diverse sector. Investors can use a wide range of investment structures including credit, equity and debt, and have different risk appetites. Some investors will provide technical assistance to increase capability and reduce risk alongside investments.
The providers of private capital into blended finance transactions are usually investors with more flexibility and a higher risk appetite than institutions. They may be private companies or family offices. They are often able to play a critical role shepherding a project through start up and into scaling up. This requires skill and patience and an understanding that providing technical capability building support may be what is required to scale the project.
Some of these investors have specific knowledge around sectors. For example, Grok Ventures has expertise in managing technology risk. This is important as it is a key aspect of our climate transition.
Private capital has a critical role in financing the climate transition. This is well recognised locally and globally and is well described here by the World Economic Forum.
After several years, private capital firms will usually look to divest all or some of their interest in the business in order to provide capital and returns back to the investors in the fund. Divestments generally occur through disposal of equity or other interests in the business via trade sale, secondary-market sale, share market listing, or a sale to management of the business. In the case of private credit, divestment will generally involve repayment of debt facilities or some other form of liquidity event. (Australian Investment Council)
The Australian Government recognises the importance of mobilizing private capital to support Australia’s climate transition and released the Sustainable Finance Roadmap in June 2024.
Relevant links
Private Capital Blended Finance Case Studies
Join the Blended Finance for Climate Initiative
You are welcome to send new case studies, links to current blended finance opportunities, or event
invitations you would like to share with the network to [email protected]
