Multilateral and bilateral development agencies are increasingly turning to blended finance as a means of mobilising private resources to address investment needs in connection with the Sustainable Development Goals. There is an urgent need for a better understanding of the potential role of blended finance in achieving the SDGs. Blended finance comprises various instruments and modalities, and monitoring and evaluation will be critical for establishing an evidence base about ‘what works in which context’. The practice of evaluation of blended finance is still under development, and this paper highlights a number of challenges, which will have to be addressed.
Firstly, the paper clearly shows that institutional and organisational factors influence evaluation practice. It is important that a shared evaluation culture is established. Efforts should also be made to ensure that evaluation reports from DFIs and private intermediaries will, as a general principle, be publicly available.
Secondly, the lack of a common language and terminology is a clear finding from the brief review of a sample of evaluations. Key concepts such as additionality and impact are used in different ways, which makes comparisons difficult. Some evaluations use the DAC evaluation terminology, but it may be necessary to adapt and develop existing terminology to make it relevant to blended finance evaluation.
Thirdly, the review of the sample of evaluations also shows a wide diversity in applied evaluation approaches. This relates to the formulation of evaluation criteria as well as to the choice of methodological approaches. There may also be a need for more detailed assessments of the relevance of individual evaluation methods for specific blended finance instruments and interventions.
Fourthly, evaluations of blended finance are highly dependent on the existence of robust monitoring systems. The quality of these systems varies, and efforts should be made to improve access to information and to ensure availability of comparable monitoring data.
Fifthly, there is a strong need for learning more about ‘what works and in which context’. The review only focused on evaluation approaches, but a systematic review of existing evidence with a focus on achieved results by various blended finance instruments would be an important contribution to the further discussions on the potential role and relevance of blended finance for the achievement of the SDGs.
The 2030 Agenda has expanded the number and diversity of financial actors, and addressing the above-mentioned five challenges of evaluation of blended finance will therefore require building consensus across a diverse and multilayered set of stakeholders.