How not to fill the gap: Blended finance and climate justice

Policymakers worldwide currently share the general consensus that filling the climate finance gap will require attracting private investments. In this article, we discuss a family of instruments aimed at achieving this goal, so-called Blended Finance (BF) instruments. BF uses public resources to improve the risk/reward profile of relevant mitigation and adaptation projects in order to render them vastly more attractive to private investors. Political economy and critical macrofinance scholars have generally taken a critical stance towards BF. We contribute to this debate by arguing that BF also threatens to violate central climate justice-relevant fairness considerations. In particular, we claim that because BF inherently requires supported projects to be profitable, it unfairly generates financial flows from citizens in developing countries to private investors in developed countries. This contradicts central fairness requirements of plausible climate justice approaches, which necessitate that net financial flows move in precisely the opposite direction, from developed to developing countries. We discuss various objections to our argument and finally end by defending a policy approach aimed at increasing the fiscal space of developing countries before turning to private finance, which we consider much more likely to preserve climate justice.