As public budgets tighten and biodiversity and climate risks intensify, attention is increasingly turning to blended finance \u2013 an approach that combines concessional public funding with commercial investment to mobilise large-scale capital.<\/p>\n\n\n\n
Supporters say this model can reduce investment risks and unlock private capital for projects that might otherwise struggle to secure funding. Critics caution that such approaches still depend heavily on public support and may not be easily replicable everywhere.<\/p>\n\n\n\n
In Hyderabad, India, one of the world\u2019s largest municipal LED streetlighting programs<\/a> has emerged as a prominent example of how blended finance can work in practice.<\/p>\n\n\n\n Turning Streetlights into Climate Finance<\/strong><\/p>\n\n\n Hyderabad, a rapidly expanding and climate-vulnerable metropolis, has sought to address rising temperatures and growing energy demand by retrofitting its street lighting system with energy-efficient LEDs under India\u2019s Street Lighting National Programme (SLNP). The initiative was part of a broader programme \u2013 Creating and Sustaining Markets for Energy Efficiency \u2013 implemented by Energy Efficiency Services Limited (EESL) in partnership with the United Nations Environment Programme (UNEP) and the Asian Development Bank (ADB), with support from the GEF.<\/p>\n\n\n\n The program combined GEF grant funding<\/a> with more than USD 434 million in co-financing to deploy energy-efficient technologies at scale.<\/p>\n\n\n\n \u201cThe environmental financing gap runs into hundreds of billions of dollars annually. This is a scale that grants and ODA alone cannot close,\u201d said Fred Boltz, Head of Programming at the GEF.<\/p>\n\n\n\n \u201cMobilising private capital is essential to sustaining a healthy planet.\u201d<\/p>\n\n\n\n Blended finance<\/a> works by reducing risks for private investors \u2013 through concessional loans, guarantees, or grant support \u2013 making projects viable in markets where returns are uncertain. By absorbing part of the risk, public or philanthropic funding enables commercial investors to participate in sectors such as renewable energy, biodiversity, and sustainable infrastructure, which are often perceived as too risky.<\/p>\n\n\n\n In Hyderabad, EESL financed the installation of LED streetlights and recovered costs through future energy savings, eliminating the need for large upfront spending by the Greater Hyderabad Municipal Corporation (GHMC).<\/p>\n\n\n\n More than 450,000<\/a> streetlights were replaced during the initial phases, with further expansion extending coverage across the city. Electricity consumption linked to public lighting dropped by roughly half, generating annual savings of more than \u20b91 billion (about USD 12 million) while significantly reducing carbon emissions.<\/p>\n\n\n\n How Savings Became an Asset<\/strong><\/p>\n\n\n\n The financing structure relied on a \u201cdeemed savings\u201d model. Instead of paying upfront, municipal authorities repaid investments over time using verified reductions in electricity and maintenance costs.<\/p>\n\n\n\n Supporters say such arrangements help cities modernise infrastructure, despite budget constraints. But analysts warn that they depend on accurate projections, reliable maintenance, and strong institutional capacity.<\/p>\n\n\n\n Experts agree that blended finance works best when public institutions remain actively involved in implementation and oversight.<\/p>\n\n\n\n In Hyderabad, the programme incorporated a Centralised Monitoring and Control System (CCMS)<\/a>, allowing authorities to track electricity use, detect faults, and monitor performance in real time.<\/p>\n\n\n\n The system improved operational oversight while generating the data needed for performance-linked financing \u2013 where payments are tied to independently verified outcomes.<\/p>\n\n\n\n <\/p>\n\n\n\n Newly retrofitted LED street lights on the eastern edge of Hyderabad, in India. LED lights are a cost- and energy-efficient alternative to other lighting and bring a sense of security to the areas where they are installed. Credit: Stella Paul\/IPS<\/p>\n\n\n\n Beyond Carbon: From Climate Finance to Everyday Life<\/strong><\/p>\n\n\n\n For residents, the effects of the LED transition are often experienced less in financial or technical terms than in everyday routines and perceptions of safety.<\/p>\n\n\n\n Kavitha Ramavath (27) and her husband, Ravi Ramavath (35), recently moved with their two young children to Uppal Bhagath, a fast-growing neighbourhood on the eastern edge of Hyderabad. They previously lived in Uppal Kalan, about four kilometres away, where housing was cheaper, but the infrastructure was poor. Kavitha works as a domestic worker, while Ravi drives an auto-rickshaw.<\/p>\n\n\n\n Although their rent has nearly doubled, improved lighting has changed their daily lives.<\/p>\n\n\n\n \u201cThis area is more lively, with wider and better-lit roads,\u201d Kavitha said, pointing toward an LED streetlight outside her lane. \u201cEarlier, I used to feel scared walking alone to drop or pick up my children from tuition classes.\u201d<\/p>\n\n\n\n Now, she says, her children can play outside longer in the evenings and nearby shops keep their shutters open later. Ravi adds that he can park his auto-rickshaw outside their home without worrying about theft or damage.<\/p>\n\n\n\n Urban planners say improved public lighting can influence mobility, informal economic activity, and perceptions of public safety \u2013 especially for women and children.<\/p>\n\n\n\n Last week, Kavitha started a small fruit cart outside her home. The brighter street allows her to continue working after dusk, when customer footfall increases.<\/p>\n\n\n\n For her family, the benefits are not measured in emissions reductions or financing structures but in the possibility of earning a little more income while feeling safer in public spaces.<\/p>\n\n\n\n From Local Streets to Global Finance Models<\/strong><\/p>\n\n\n\n While Hyderabad\u2019s experience highlights blended finance in climate mitigation, the model increasingly extends far beyond energy efficiency.<\/p>\n\n\n\n Across the world, GEF-backed blended finance initiatives are channelling investments into biodiversity conservation, ocean protection, and sustainable supply chains. These projects demonstrate how public funding can unlock private capital in sectors that have traditionally struggled to attract investment.<\/p>\n\n\n\n In Brazil, for instance, the Living Amazon Mechanism combines capital market instruments with philanthropic funding to support sustainable supply chains in the Amazon. It links cooperatives and local producers with financing while reducing risk through the participation of a corporate buyer, Natura, which acts as an investor and off-taker.<\/p>\n\n\n\n Similarly, global platforms such as the IFC\u2013GEF Green Global Supply Chain Decarbonisation Initiative aim to provide long-term, green-linked loans to manufacturers and suppliers in emerging markets, helping address a critical barrier \u2013 access to affordable capital for decarbonisation.<\/p>\n\n\n\n At the sovereign level, blended finance is also enabling innovative debt and bond instruments. The Seychelles blue bond<\/a>, supported by a World Bank<\/a> guarantee and GEF concessional financing, has demonstrated how countries can raise private capital for marine conservation while reducing borrowing costs<\/p>\n\n\n\n In Latin America and the Caribbean, a new facility backed by the Inter-American Development Bank (IDB)<\/a> and GEF is using blended finance to expand debt-for-nature conversions, which allow countries to refinance debt at lower costs and redirect savings toward biodiversity conservation and climate resilience.<\/p>\n\n\n\n These models share a common principle: public or concessional capital absorbs risks, enabling private investors to enter sectors where financial returns alone might not justify investment.<\/p>\n\n\n\n![\"GEF](\"https:\/\/inpsjapan.com\/en\/wp-content\/uploads\/2026\/06\/GEF_last_300.jpg\")