SAMARKAND, Uzbekistan, Jul 7 2026 (IPS) - For most of the Eighth Global Environmental Facility (GEF) Assembly last month, the atmosphere inside Samarkand’s sprawling Congress Centre echoed a growing confidence of global environmental policymakers.
Delegates darted between plenary halls and side events discussing biodiversity targets, climate adaptation and ecosystem restoration. PowerPoint charts displayed shrinking forests. Investment bankers touted new financing tools. Smartly dressed bartenders served coffee in perfect air-conditioned comfort.
Yet despite this spectre of environmental diplomacy, a hard question lingered: How to mobilise private money when public coffers can no longer provide?
To many, the answer was blended finance.
The question became even more tangible on a humid Saturday morning when a group of delegates boarded low-emission coaches to Zarafshan National Nature Park on the outskirts of the ancient Silk Road city.
The excursion, many delegates later affirmed, offered a glimpse of a successful conservation model.
Walking through one of Central Asia’s surviving tugai forests – a riverside ecosystem that once stretched across much of the region – delegates witnessed the recovery of the Bukhara deer, a species once pushed to the edge of survival by habitat loss and poaching.
Wide-eyed delegates watched as rangers briskly hurled bundles of fresh forage, while several deer emerged from the reeds with the ease of animals that had learned to trust their caretakers.
A ranger works in an enclosure at the Zarafshan National Natural Park, one of Uzbekistan’s newest protected areas established to conserve the fragile riparian forests of the Zarafshan River and recover threatened wildlife, including the iconic Bukhara deer. The park illustrates the type of landscape where blended finance could help bridge funding gaps for ecosystem restoration, sustainable tourism and community livelihoods, provided investments deliver measurable conservation outcomes. Credit: Kizito Makoye/IPS
For conservationists, the scene was a tangible sign of ecological recovery in a parched Uzbek steppe. For financiers, it carried a different meaning—evidence that restoration requires sustained investment long after donor attention has shifted elsewhere.
That tension – between ecological reality and financial logic – ran through nearly every conversation in Samarkand, where the GEF’s Eighth Assembly signalled a deeper shift toward blended finance as a core conservation funding model.
The GEF’s new replenishment cycle, dubbed GEF-9, will secure at least $3.9 billion in donor commitments through 2030. But the more consequential shift lies in its architecture, with a target of using roughly a quarter of the resources to crowd in private capital alongside public and concessional finance.
GEF officials explain that the institution’s approach differs from other blended finance initiatives by targeting only investments where markets have clearly failed.
“It is worth stating clearly at the outset that GEF’s own approach to blended finance has been deliberately targeted and highly catalytic,” Avril Benchimol, Senior Blended Finance Specialist at the GEF, told IPS. “By design, GEF’s concessional resources have been directed at transactions where market failure is demonstrable – frontier areas such as circular economy, nature-based solutions, conservation finance, and sustainable agriculture in challenging markets where private capital does not flow without a catalytic push.”
Samuel Wangwe, senior researcher at the Economic and Social Research Foundation, said this shift towards more blended finance initiatives reflects a broader transformation in development thinking.
“Blended finance is essentially an attempt to stretch scarce public resources further by bringing in private capital. That logic is understandable in today’s fiscal environment, but it does not remove the underlying development constraints that many countries face,” he said.
The logic is rooted in a fiscal reality widely acknowledged across development finance institutions: public budgets are insufficient to meet global environmental needs, with annual financing gaps for biodiversity and climate resilience running into hundreds of billions of dollars.
Blended finance is intended to bridge that gap by using public capital to absorb early-stage risk, improving the risk-return profile of projects that would not be viable for commercial investors.
A park ranger guides delegates through one of Uzbekistan’s protected landscapes, explaining ongoing conservation and restoration efforts. The visit highlighted how long-term biodiversity protection depends not only on strong environmental policies but also on innovative financing mechanisms capable of attracting private capital while safeguarding public conservation objectives. Credit: Kizito Makoye/IPS
But Wangwe warned that the effectiveness of this model depends heavily on institutional strength.
“You cannot financialise ecosystems without strong governance systems. Where land rights are unclear or enforcement is weak, the risk does not disappear—it is simply priced differently, often at a higher cost to the country.”
The timing reflects broader strain in global public finance. Many donor governments face rising debt burdens, domestic political pressures and competing priorities from defence to healthcare. Development assistance budgets, once expected to expand alongside climate commitments, are instead substantially shrinking.
In that constrained environment, multilateral institutions are under pressure to demonstrate leverage – how much private capital can be mobilised per unit of public spending. As a result, blended finance has shifted from a niche development tool to a central pillar of environmental action, offering policymakers a politically palatable narrative: scarce public funds are not being reduced, but multiplied.
Wangwe, however, cautioned against over-reliance on this narrative.
“There is a tendency now to focus on how much money can be leveraged, rather than how effectively institutions can absorb and manage that investment. But without institutional depth, leverage becomes a hollow metric.”
GEF argues that its own experience suggests carefully structured concessional finance can mobilise substantially larger private investment than broader market averages.
“The concern about additionality is legitimate at the system level, and GEF takes it seriously as part of the broader conversation,” Benchimol said.
“GEF’s own mobilisation ratios have consistently outperformed the [market] average, in part because of the deliberate application of a minimum concessionality principle—using only as much concessional support as is necessary to make a transaction viable, and no more.”
Yet the promise of scale masks a more selective reality. Institutional investors – pension funds, insurers and asset managers – do not allocate capital based on environmental urgency. They respond to predictable revenue streams and manageable risk.
That distinction matters. Renewable energy projects increasingly fit that profile, offering long-term contracts and stable cash flows. Many conservation activities do not.
Ecosystem restoration, biodiversity protection and watershed management often generate public goods that are difficult to monetise. A restored forest may reduce carbon emissions and stabilise rainfall patterns, but it does not always produce direct financial returns.
As a result, blended finance works best where environmental projects can be partially ‘financialised’ – through carbon credits, ecotourism revenues or infrastructure-linked returns. Pure conservation projects remain harder to structure in bankable form.
Nowhere is this mismatch more visible than in Africa. The continent holds some of the world’s most critical biodiversity assets, from the Congo Basin to East Africa’s savannahs, yet continues to attract a relatively small share of global private environmental finance.
Contrary to common assumptions, the binding constraint is not global liquidity. Trillions of dollars sit in institutional portfolios seeking yield.
As Wangwe put it, “Africa is not short of opportunities. It is short of bankable structures that meet investor expectations. That gap is not technical alone—it is institutional and political.”
The result is a structural imbalance: countries with stronger institutions attract disproportionate flows of blended finance, while those facing the most severe environmental degradation remain dependent on grants and concessional funding.
GEF acknowledges that imbalance remains a genuine weakness of blended finance globally.
“The GEF fully shares the concern that blended finance instruments have not always reached the countries and communities with the greatest need,” Benchimol said.
“The concentration of blended finance flows in middle-income and relatively more bankable markets is a documented challenge, and addressing it is a priority as GEF shapes its future programming.”
This dynamic brings governance to the centre of the debate. Blended finance does not eliminate institutional risk; it re-prices it.
Guarantees, first-loss capital and concessional tranches can improve project economics, but they cannot substitute for credible legal systems or stable regulatory frameworks.
In practice, blended finance tends to cluster in environments where governance already functions relatively well. Where institutions are weaker, transaction costs rise and investor appetite declines.
That creates an uncomfortable implication: the places most in need of environmental investment are often the least able to attract it.
Wangwe added that this dynamic risks deepening inequality in conservation finance.
“If local communities are only seen as beneficiaries rather than stakeholders in financial structures, then blended finance risks repeating the same extractive patterns we have seen in other sectors, just under a greener label.”
GEF says future financing models must become far more country-led.
“Equity in blended finance requires genuine country ownership and voice—ensuring that recipient governments are partners in the design of financial structures rather than passive recipients of externally defined solutions,” Benchimol said.
Beyond technical design lies a more political question: who ultimately controls environmental assets as they become financialised?
Blended finance structures distribute risk and returns among governments, investors and local communities. But those distributions are not neutral.
Critics warn that conservation could increasingly resemble an investment class, where financial returns flow outward while ecological and social costs remain local.
“There is a risk that conservation becomes an asset class without community ownership,” Wangwe said. “That would replicate extractive dynamics under a green label.”
Despite its market-orientated framing, blended finance does not reduce the role of public institutions. It reconfigures it.
Governments and development agencies continue to provide first-loss capital, guarantees, project preparation funding and regulatory support. Without these interventions, most blended-finance transactions would not be viable.
Public finance, in other words, is not replaced – it is embedded deeper in deal structures, even as its presence becomes less visible in headline figures.
Wangwe stressed that this reality is often overlooked.
“The idea that private capital will replace public finance is misleading. In reality, public money is doing more of the heavy lifting than the rhetoric suggests – it is just now embedded deeper in the transaction structure.”
That raises a critical risk: if public spending is cut on the assumption that private capital will fill the gap, the entire model could weaken.
Closing the assembly, GEF interim CEO Claude Gascon noted that the model relies on cooperation and shared purpose.
He stressed the GEF was built on the understanding that no one can meet global environmental challenges alone and that it brings together countries, conventions, IPLCs, civil society, the private sector, and other stakeholders to deliver global environmental benefits.
“We need banks, institutional investors, corporations, and innovators to engage at a fundamentally different level. We need them not only to finance transition but also to shape it responsibly. We need business models that reward stewardship, not short-term extraction; disclosure and accountability systems that value long-term resilience; and governance frameworks that make environmental performance central to business success. The private sector has extraordinary reach, influence, and ingenuity. But with that influence comes responsibility.”
Back in Zarafshan National Nature Park, the Bukhara deer eventually retreated into the reeds as the delegation prepared to leave. The moment was brief, almost incidental, yet it underscored a central contradiction in global environmental finance.
Capital can accelerate conservation outcomes. It can reduce risk, improve coordination and expand funding. But it cannot substitute for the institutional and ecological conditions that determine whether recovery endures.
As delegates returned to Samarkand, optimism about blended finance remained intact. So did its central uncertainty.
For Africa, Wangwe argued, the challenge is not simply attracting investment but building the systems that can sustain it.
“The real test is not the volume of private investment mobilised, but whether ecosystems are restored, livelihoods are protected, and institutions are strengthened enough to sustain those gains beyond donor cycles.”
Despite the uncertainties, GEF says it intends to deepen – not scale back – its use of blended finance.
“GEF-9 is targeting 25% of GEF Trust Fund resources for blended finance, signalling a deliberate scaling of this approach – grounded in the conviction that blended finance, when properly structured and targeted, is not a subsidy for investments that markets would have made anyway, but a catalytic lever for investments that would not have happened at all,” Benchimol said.
The success of GEF-9 will therefore not be measured by how much private capital is mobilised but by where it flows – and whether it translates into lasting ecological recovery.
Note: This feature is published with the support of the GEF. IPS is solely responsible for the editorial content, and it does not necessarily reflect the views of the GEF.
IPS UN Bureau Report
