Beijing, May 6, 2025 - Abundant Climate Action Institute released the brief “Blended Finance X: Unlocking Capital for Climate Technologies” (hereinafter referred to as the “brief”). The brief introduces “Blended Finance X” — an evolved financial mechanism building upon the core concept of blended finance — as an innovative and forward-looking solution to address two pressing challenges in climate investment: the shortage of capital and the lack of investable projects. At the heart of “Blended Finance X” lies the strategic use of structured financial tools and the expansion of concessional capital participation, aimed at reducing the investment risks for commercial capital in climate tech projects, thereby unlocking and scaling up commercial investment participation and fostering a virtuous cycle within the climate finance ecosystem.

Achieving net-zero emissions will require massive global investment in the research, development, and deployment of innovative low-carbon technologies. Yet, while global greenhouse gas emissions continue to rise, climate tech financing remains insufficient—particularly in the early stages of technology development. In response, Abundant Climate Action Institute and the Macro and Green Finance Lab at the National School of Development, Peking University have jointly explored the potential of blended finance in China's climate investment landscape, analyzing both the challenges and innovative approaches to applying blended finance in the Chinese context.

Abundant Climate's team is dedicated to building innovative financial models, exploring practical applications, and developing commercially viable climate finance solutions in collaboration with partners across sectors. Within the blended finance framework, the central question this brief aims to address is how to design a model that both reduces investment risk and supports high-impact climate projects.

The brief analyzes the key barriers to climate investment and highlights the current mismatch between emissions reduction potential and investor preferences. It points out that climate technologies often involve emerging technologies and unproven business models, requiring a long timeline from R&D to market deployment. This results in a longer investment return cycle compared to other sectors, with a deeper “valley of death” on the J-curve, demanding greater investor patience and higher risk tolerance.

Although blended finance mechanisms currently help support projects aligned with social and sustainability goals—by combining concessional capital from public and philanthropic sources—the scale of blended finance in the climate space remains limited. It faces multiple challenges, including a shortage of concessional capital, low leverage rate of private capital, and a lack of investable projects that generate measurable climate impact.

In response to these challenges, Abundant Climate Action Institution proposes an innovative solution—“Blended Finance X”—which aims to further reduce investment risk through a dual approach: structured securitization and expanded concessional capital participation. This mechanism addresses the lack of commercial capital willingness by creating a more stable financing environment for climate tech startups and a wide range of green projects.

Amy Zheng, Senior Researcher at Abundant Climate, said:

"To unlock climate tech’s future, we must innovate financial tools that meet diverse investor needs and bridge the gap between philanthropy and commercial capital. By mobilizing more ‘quasi-concessional’ private capital with higher risk tolerance and lower return expectations, we can fund early-stage, high-potential solutions through the valley of death and accelerate sustainable development."

The brief provides a detailed breakdown of the mechanisms and financial logic behind “Blended Finance X,” illustrating how structured securities can enable risk tranching, risk diversification, flexible subscription, diversified fundraising channels, and more efficient exit strategies—enhancing both investment flexibility and capital liquidity.

In this mechanism, the involvement of concessional capital—such as public and philanthropic funding—is particularly critical. These sources of capital can take on the early-stage investment risk, thereby reducing the exposure for commercial investors. In addition, patient capital—capital with a long-term horizon and higher risk tolerance—is equally essential. However, in China, patient capital is often constrained by short-term performance pressures, limiting its capacity to support high-risk, long-cycle climate technology projects.

To facilitate the implementation of the “Blended Finance X” model, the brief outlines three key action recommendations:

1. Accelerate financial mechanism innovation by clearly defining the higher-risk-bearing role of concessional capital (e.g., first-loss tranche), cultivating more “quasi-concessional” capital—investors who accept lower returns but are not purely philanthropic—to help crowd in commercial capital.

2. Improve performance assessment frameworks for patient capital, establish tolerance mechanisms for underperformance, and enhance public-private capital collaboration.

3. Encourage philanthropic capital to engage in climate investment through blended finance instruments, while strengthening talent incentives in green finance.

In response to the capital bottlenecks hindering low-carbon transition, Abundant Climate hopes that forward-looking solutions like “Blended Finance X” can effectively address the challenge of fair cost-sharing and resource redistribution. By creating more collaborative space among public, philanthropic, and private capital, it aims to channel much-needed resources to technological and social innovations that have significant long-term value but have traditionally struggled to secure financing—unlocking new opportunities for acceleration and scale.

Abundant Climate is actively seeking collaboration with policy makers, financial institutions, philanthropic foundations, and corporations to jointly explore the practical application of “Blended Finance X.” In parallel, we will continue to pursue innovative research and practices related to financial tools that support green industrial transformation and catalyze capital for climate technology. If you are interested in partnering with us, please visit abundantclimate.com or contact us at info@abundantclimate.com.