The math is stark. The world needs roughly $4 trillion annually to modernize energy systems, stabilize food production, strengthen supply chains, and build climate-resilient infrastructure. Yet last year, blended finance vehicles mobilized only about $18 billion—a clear signal of a structural capital gap. The constraint isn’t a lack of viable projects or investment opportunities, it’s a mismatch between risk, return, and available capital. Many essential projects in emerging markets remain unfunded because they fall outside commercial investors’ risk tolerance. Blended finance closes this gap by deploying concessional capital to rebalance risk–return profiles and crowd in private investment at scale.
On February 5, students, alumni, and practitioners gathered at Haas for a hands-on workshop to better understand and employ blended finance, co-hosted by SAIF, the Master of Development Engineering program at the Blum Center for Developing Economies, and the Sustainability Alumni at Berkeley Haas (SABH). The session began by laying out the mechanics and current realities of blended finance, then shifted into live case studies. In small groups, participants stepped into the role of capital designers — identifying key stakeholders, tracing where risk sits, and wrestling with the frictions that often prevent different forms of capital from aligning.
Joe Dougherty, partner at Dalberg, framed the challenge with a simple visual: imagine a quarter sitting on a tabletop. The quarter represents concessional capital (i.e. grants, first-loss investments, and below-market financing from governments, foundations, and impact investors). The table represents the vast pool of commercial capital from pension funds, institutional investors, banks, all seeking market-rate returns. “The trick,” Joe explained, “is how do you use that quarter to unlock that whole tabletop for a project that has real social benefits?”
“The trick is how do you use that quarter to unlock that whole tabletop for a project that has real social benefits?” – Joe Dougherty
The answer lies in diagnosis and design. Before deploying any catalytic capital, you need to understand what’s actually constraining investment: Is it insufficient cash flow? Perceived risk? Lack of collateral? High transaction costs? Then you match the right tool (i.e. first-loss debt or equity, grants, concessional loans, guarantees, technical assistance) to address that specific constraint. And critically, you aim for what Joe called “the sweet spot between feasibility and additionality”: projects that are viable but need a strategic nudge to attract commercial capital.
Photo by Adrianne Johnson
Three Deals, Three Design Challenges
Regenerative Agriculture at Scale: The ReCa Fund
Anna Toness presented a problem that captures agriculture’s paradox in sub-Saharan Africa: the sector employs 60% of the workforce in countries like Malawi and Zambia, sits atop 60% of the world’s uncultivated arable land, and faces a market projected to grow from $280 billion to over $1 trillion by 2030. Yet agriculture receives less than 5% of global investment and less than 4% of climate finance. The Regenerative Capital Fund is tackling this with a $400 million blended finance structure built around an evergreen fund model, which is unusual in development finance where most funds have fixed 12-14 year terms. The evergreen structure matters because regenerative agriculture assets improve with time; returns in the first five years might be just a few percent, then accelerate after ten years as soils recover and systems mature.
The capital stack reveals how blended finance de-risks at scale. African institutional capital, primarily pension funds from Malawi and Zambia, provides 50% of the fund at 12-15% expected ROI — investors who understand country risk because they’re from these countries. The fund targets global commercial investors for another 30% at similar returns, but to unlock both tranches, it needs 20% in concessional capital at just 3-5% ROI, which takes first losses and fundamentally changes the risk calculus for everyone else.
Perhaps most crucial is the $20 million technical assistance “sidecar” facility operating semi-independently from the main fund. This isn’t optional infrastructure – it’s what makes the deals bankable, providing capacity building for 140,000 smallholder farmers (60% women), climate-linked finance through a revolving loan fund with embedded insurance, and impact measurement systems that give commercial investors confidence in both returns and resilience outcomes. One elegant detail ties it together: because these farms export crops to Europe and the US, they earn in dollars, naturally hedging the foreign exchange risk that typically deters international investors in African agriculture.
Energy Sovereignty in Tribal Nations: cDots
Viviana Alvarez, cDots CEO, presented a layered and distinctly American capital challenge. Oklahoma is home to 38 federally recognized Tribal Nations positioned at the center of the country’s evolving energy economy, where tribal lands account for just 2% of U.S. land yet hold an estimated 6% of renewable energy potential, and nearly half of critical mineral projects are located on or near Indigenous land. Despite this, Tribes own less than 2% of energy project equity nationwide. Electricity prices in Oklahoma are projected to rise 35-350% by 2035 due to AI-driven data center demand and generation bottlenecks — making energy investment, for households already spending more than 10% of income on energy, a matter of economic control, revenue retention, and long-term Nation-building.
cDots is working alongside the Muscogee (Creek) Nation to aggregate $50–100 million across distributed projects typically ranging from $5–20 million each. By bundling projects across revenue-generating tribal institutions like casinos, hospitals, government buildings, and school systems, the Nation can demonstrate reliable cash flows sufficient to access institutional debt markets. Proposed capital structures include senior bank debt, subordinated green bank debt, Tribal CDFI participation, federal tax credits, a Nation-held equity position, and a philanthropic backstop, with a revolving mechanism redirecting energy savings into debt service and workforce development.
What makes this effort distinctive is its governance dimension. For many Tribal Nations, debt has not historically been the preferred path for infrastructure development, and moving toward leveraged capital represents a structural shift. Sovereignty requires that ownership, control, and benefit-sharing align with Tribal priorities rather than solely financial return metrics. As Adriana Penuela-Useche (EWMBA ’22), who works at cDots and co-leads SABH, noted: “New mechanisms need to exist, and you don’t have to start as a financier to be able to build them.”
“New mechanisms need to exist, and you don’t have to start as a financier to be able to build them.” – Adriana Penuela-Useche (EWMBA ’22)
Bridging Timing Gaps: Power Trust’s REC Prepayment Facility
Christina Cairns, who led development finance initiatives at USAID and DFC, presented an innovative use of Renewable Energy Credits (RECs) to solve a timing problem for distributed solar developers. Corporate buyers like Microsoft, Salesforce, and Netflix pay per megawatt-hour to support off-grid renewable energy, but only after electricity is generated, measured, and certified. For developers working in remote areas of Africa, Asia, and Latin America, this creates a chicken-and-egg problem: they need capital upfront to build solar and battery systems but can’t access loans without expensive collateral or cutting into operational budgets.
Power Trust’s solution is a $100 million prepayment facility that inverts the timing by paying developers upfront for future RECs, with repayment happening over 10-20 years as credits are generated and sold. If a specific project fails, Power Trust can substitute another from the same developer’s portfolio — creating portfolio-level risk management rather than reliance on single-project success. The facility is designed with geographic diversification across 30% Africa, 40% Asia, and 30% Latin America to balance regional risk profiles.
A tiered capital structure matches risk to investor type: developers with established credit history and tangible collateral can access senior debt, while those serving community-level projects like health clinics in Sierra Leone or island microgrids in Indonesia require junior debt or first-loss capital. What emerged from workshop discussions is that context matters enormously, as a solar installation for a Mercedes-Benz factory in South Africa looks very different from a rural health clinic in Uganda, each requiring distinct credit profiles, revenue models, and capital structures.
Design Principles for Catalytic Capital
Across the three cases, a few themes surfaced clearly. Catalytic capital (especially first-loss positions) is in high demand and short supply. Nearly every structure depended on it to unlock senior investment. Technical assistance proved equally essential. It is the bridge between a viable idea and an investable asset.
Ownership matters. Projects move faster and endure longer when local institutions hold real equity and decision-making power. Scale matters as well. Aggregating smaller projects reduces transaction costs, improves credit profiles, and creates entry points for institutional lenders. And time matters. Some models simply require capital that can wait, capital aligned with operational realities rather than quarterly expectations.
More fundamentally, the exercise reinforced a diagnostic mindset. The constraint determines the structure. If currency volatility deters investors, build revenue streams in hard currency. If early-stage developers lack credit history, pool projects and introduce guarantees. If governance and sovereignty sit at the center of the equation, structure ownership and control accordingly. There is no universal template. Capital stacks are responses to specific frictions.
For those entering this space, the field is expanding. Development finance institutions, impact funds, green banks, and platforms like PowerTrust and cDots are building teams that blend financial structuring with sector expertise. Strong financial literacy matters, but so do engineering, operations, risk assessment, and sector depth. The financing gap won’t be closed by grants alone, nor will it attract sufficient commercial capital without strategic intervention. It requires what these three deals demonstrate: creative combinations of public, private, and philanthropic capital, structured to mobilize resources at scale. This generation of practitioners isn’t just learning the tools of blended finance — they’re actively reimagining what’s possible.