This is the second in a two-part series exploring how blended finance can help sustain and scale global health investments amid declining public and donor funding. Part 2 examines how philanthropic and private funders can engage with and amplify the impact of blended finance solutions.

The ongoing cuts to government funding for development and global health are putting decades of hard-fought progress at risk.  As detailed in Part 1, the resulting shortfalls in Official Development Assistance (ODA) (up to 45% as a share of gross national income) could result in millions of preventable deaths per year, especially in low-income settings (Center for Global Development, 2023).

Philanthropic and private funders have long played essential roles in the global health ecosystem. Private foundations have driven some of the most significant developments and innovations in global health over recent decades, bringing flexibility and innovation to move the sector forward. Total DAH from philanthropy rose steadily from 2000 through the COVID-19 pandemic, recently stabilizing at approximately $12.3 billion per year (Source: Institute For Health Metrics and Evaluation [IHME], 2023).

Yet, the scale of the funding shortfall from reduced public budgets far exceeds what philanthropy alone can bridge. Despite the growth in private spending in recent years, philanthropic contributions amounted to less than 20% of total Development Assistance for Health (DAH) in 2023 (Source: IHME). While this represents a substantial share relative to other development sectors (philanthropic funding is just 5% of total ODA; source: Organisation for Economic Co-operation and Development), it underscores that even significant increases in private giving cannot fully offset declining public-sector resources.

Blended finance presents an opportunity for philanthropies to multiply the impact of each dollar spent. Blended finance mechanisms use philanthropic and impact capital to attract larger private investments. This enables each philanthropic dollar to go further toward achieving health objectives. As discussed in Part 1, a range of available blended finance models can address specific needs in the health sector. These include:

• Concessional financing (offering below-market terms to catalyze private investment)
• Technical assistance funds (providing capacity-building support)
• Guarantees and risk insurance (reducing investment risk to attract commercial capital)
• Seed or design-stage financing (validating early-stage innovations before scaling)

The nature of blended finance means it cannot wholly replace grants. Blended finance requires some level of ‘return’ on investments. This can be difficult to ensure in healthcare, as we often consider healthcare a human right and people’s lives are at stake. Therefore, it is best suited to work alongside grants, supporting specific interventions that can generate revenue while maintaining equitable public access to care.

This strategic use of blended finance can empower philanthropies to get greater leverage from their spending, ensuring—when these approaches are relevant and appropriate—that essential health programs remain funded despite shrinking public-sector contributions.

Engagement Models

Philanthropies and private funders have several practical ways to engage with blended mechanisms. As a starting point, funders can look to already-operating blended funds as potential partners, as these can be the fastest routes to get started. Over time, other blended financing tools can offer funders more flexibility to develop and tailor solutions to their own needs.

The following framework highlights three key pathways through which funders can strategically participate with blended funds: directly contributing capital, catalyzing grantee access to funds, and coordinating complementary activities alongside blended funds.

Importantly, these pathways are flexible; funders can adopt multiple approaches simultaneously or sequentially, based on their objectives and capabilities.

1. Contribute Directly to Blended Funds

Direct contributions involve philanthropies providing capital to blended funds, either by investing in existing funds or establishing new structures.

Specific engagement styles can vary depending on the profile of each funder. Philanthropies should consider their own capabilities, comparative advantages, and risk tolerances when thinking about the type of fund to partner with or how to provide resources. For example:

• Large foundations: Often well-positioned to provide anchor funding, outcome-based financing, or first-loss capital that reduces investment risk for private investors, encouraging additional investment into high-impact projects.
• Corporate philanthropy: Can align funding contributions with core business strategies by providing guarantees (such as volume or price guarantees on medical products), investing in infrastructure projects related to their business expertise, or delivering technical assistance aligned with corporate capabilities.
• High-net-worth individuals (HNWI) and family offices: Can be suited to venture-style investing, catalytic early-stage capital, or results-based financing given their flexibility, risk tolerance, and ability to rapidly respond to emerging opportunities.
• Impact investors: Best placed to participate through private equity vehicles, concessional loan structures, or mezzanine finance, balancing financial returns with clear health and social impact outcomes.

Partnering directly with a blended fund can be most appropriate for philanthropies when they:

• Have substantial capital available, and want leverage on those resources while accepting potential risk
• Seek influence over the strategic direction, investment criteria, and governance of a blended fund, but are willing to share decision-making authority with co-investors
• Possess relevant expertise that can enhance the overall effectiveness of the fund

Source: Global Partnerships, 2024 Q4 investor report

Sources: UBS, Bridges Outcome Partnerships, Kenya Health Outcomes Partnership, BII, Impact Investor

2. Catalyze Grantee Access to Blended Funding

Philanthropies can multiply their impact by helping their grantees access and leverage larger pools of blended funding. Many grantees could benefit from blended financing but are not yet at a stage where they can take on larger-scale investment from a fund. In such cases, foundations can play a catalytic role to build grantee capacity and prepare them to unlock further investment. This can include:

• Providing capacity-building grants to help grantees improve governance and risk management, financial management, and operational readiness to meet the requirements and expectations of blended funds
• Funding pilot programs or feasibility studies that demonstrate the effectiveness of grantee initiatives, increasing their likelihood of securing additional investment
• Investing in rigorous evaluations, providing frameworks or toolkits, or supporting the development of internal grantee M&E functions to increase their ability to generate evidence and demonstrate programmatic impact

Playing an external role to support grantees in accessing blended funds can be the optimal approach for many funders. It may be most appropriate when:

• Funders have limited resources, making direct large-scale blended finance contributions impractical
• When funders prefer direct engagement with grantees and want to maintain control over funding decisions, but recognize the value of leveraging external blended finance
• Funders support innovative or emerging organizations that have revenue-generating potential, but lack readiness for large-scale blended investment
• Funders have a comparative advantage in building long-term capacity and sustainability in grantees

3. Coordinate and Complement Blended Funds

Philanthropies can amplify the effectiveness of blended finance by intentionally coordinating their own philanthropic investments with the revenue generating activities supported by existing funds. This complementary approach enhances overall impact and investment efficiency. This can include activities such as:

• Investing in complementary infrastructure, workforce development, or supply chain improvements that directly align with blended finance projects
• Advocating for policy changes to remove systemic barriers or incentivize investment in target health areas, thus increasing the effectiveness of blended funds
• Conducting rigorous external monitoring and evaluation, providing essential data and feedback loops, and helping optimize investee performance
• Facilitating knowledge-sharing platforms or networks that disseminate best practices and enhance sector-wide collaboration

Looking Ahead

Blended finance offers significant potential to enhance the reach and effectiveness of philanthropic capital; however, they are not fit for all funders, nor all health needs. Philanthropies should be intentional about identifying opportunities appropriate for blended investment and aligned to their own objectives. Blended finance is best suited to opportunities with clear, measurable health outcomes and viable financial models that can attract and sustain private capital. For funders focused on health priorities that may not expect to generate returns, such as disease surveillance or preventive services, other funding modalities will be more appropriate.

By thoughtfully combining blended finance strategies with direct grants and coordinated efforts, philanthropies can ensure that their investments sustainably protect and advance global health priorities during this global funding transition.