In 2018, Vietnam launched its first industrial-scale solar power plant on 300 hectares of hard-to-farm land in the country’s poorest province. With initial donor support of about $20 million from Switzerland and others, the project attracted an additional $147 million in private investment, supplying electricity to 200,000 homes and cutting 240,000 tonnes of CO2 emissions annually. The success not only sparked a domestic solar boom and reduced reliance on coal but also highlighted how blended finance—a mix of public and private funding—can leverage limited development assistance to scale sustainable projects.
Switzerland, facing a CHF250 million aid budget cut in 2025, has increasingly turned to blended finance to engage private investors in sectors deemed risky or commercially unattractive. By providing guarantees and absorbing initial losses, Switzerland and other donors aim to encourage private sector participation where market incentives alone may be insufficient. Since 2002, mechanisms such as the Private Infrastructure Development Group (PIDG) have mobilized billions of dollars in private capital, demonstrating that every Swiss franc in aid can generate significant financing for socially and environmentally impactful local businesses.
Despite these successes, the broader potential of blended finance remains unfulfilled. While donors have mobilized roughly $260 billion for developing countries, the funding gap to achieve the UN Sustainable Development Goals (SDGs) still exceeds $4 trillion. Critics note that most blended finance projects focus on “bankable” sectors in middle-income countries, leaving the poorest economies and social sectors largely underserved. Experts argue that sustainable profit is often a prerequisite for private sector involvement, meaning that areas without clear commercial returns, such as basic education and social infrastructure, struggle to attract investment.
Alternative models of public-private collaboration are emerging to address these gaps. The Swiss-based Jacobs Foundation, for example, tested a co-funding mechanism in Ivory Coast to improve access to quality basic education. By mobilizing private capital from cocoa-related companies, foundations, and the government, the initiative raised $78 million, later leveraging an additional $13 million from the Global Partnership for Education Multiplier Fund. This approach shows that when businesses perceive social and economic benefits, including reputational gains, they are willing to invest even in sectors lacking immediate market returns. The Foundation is now replicating this model in Ghana and Colombia, with early results showing measurable improvements in literacy and numeracy.
Concerns persist around transparency, additionality, and “impact washing,” with critics questioning whether blended finance truly generates new social benefits or merely subsidizes private profit. The OECD notes challenges in assessing the actual contribution of such investments due to limited disclosure and inconsistent reporting standards. Nevertheless, proponents argue that creative co-funding mechanisms and carefully designed public-private partnerships remain essential tools for sustainable development, especially as traditional donor funding faces cuts. Experts like Simon Sommer of the Jacobs Foundation suggest that these pressures may catalyze more effective coordination between public and private actors, optimizing both impact and financial efficiency.
In essence, while blended finance has successfully mobilized private capital for projects like Vietnam’s solar plant, its effectiveness across broader sustainable development goals remains uneven. The approach works best where commercial returns are possible, but innovative models, such as co-funding in education, offer promising pathways to expand investment into sectors critical for equitable development. The challenge going forward is balancing public resources, private incentives, and genuine social impact to ensure these partnerships meet the scale and inclusivity required to achieve the SDGs.
