Increased occurrences in climate-focused finance: Exploring the surge in 'whale' investments
In a significant development for the global climate finance landscape, the 2024 State of Blended Finance report by Convergence reveals a surge in deal volumes and financing for climate-focused investments. The report highlights a trend of steady growth, with a record-breaking 123 deals closing in 2024, totalling nearly $18 billion in financing.
However, while the growth is promising, there is a need for greater accountability and impact measurement. Over 30% of mega-deals (those over $1 billion) failed to meet impact targets, indicating a growing emphasis on embedding SMART impact targets, outcome-based financing mechanisms, and transparent impact reporting in blended finance transactions.
The report, authored by Ayesha Bery, associate director at Convergence, also notes a shift towards larger deals in climate blended finance. The median deal size rose from $38 million between 2020 and 2023 to $65 million in 2024. This trend is driven by private investor interest in climate blended finance, with the scale of whale deals being a key factor in their appeal to institutional investors.
Notably, all whale transactions in 2024 were climate-focused. Major investors such as CDPQ, GIC, Prudential, Temasek, and others joined the Catalytic Transition Fund (CTF), announced by Brookfield Asset Management at COP28, leading to an initial close of $2.4 billion.
The upward trajectory of deal sizes in climate blended finance reflects a structural shift towards fewer and larger investment vehicles. Whale deals, accounting for 27% of the blended finance market's total financing over the past three years, have been a key characteristic of this trend.
The Convergence report suggests growing conviction within institutional investor circles over the role of blended finance funds in meeting climate solutions targets. However, it also acknowledges the challenges faced in 2024, such as regulatory headwinds from Washington and the impacts of cuts to ODA and the dismantling of USAID, which are not reflected in the report's findings.
Joan Larrea, CEO of Convergence, emphasises that the report offers a critical snapshot of the period before and will be the year against which the future will be benchmarked. The rising popularity of whale deals indicates investor confidence in the risk-return opportunity on offer in blended finance.
Large funds in blended finance provide benefits such as larger ticket sizes, ease of scaling and replication, and a diverse portfolio, thereby reducing risk. As we move forward, it is crucial to maintain this momentum while ensuring that larger deals deliver meaningful climate and development outcomes.
Whether the momentum from 2024 carries through a turbulent 2025 remains to be seen. However, the 2024 State of Blended Finance report provides a compelling case for the potential of blended finance in driving climate solutions and sustainable development.
[1] Convergence. (2024). 2024 State of Blended Finance. Retrieved from https://www.convergence.org/research/2024-state-of-blended-finance/ [2] Dalberg. (2024). The Impact of Mega-Deals in Climate Blended Finance. Retrieved from https://www.dalberg.com/publications/2024/the-impact-of-mega-deals-in-climate-blended-finance/
- The surge in deal volumes and financing for climate-focused investments, as seen in the 2024 State of Blended Finance report, suggests a growing interest in environmental science and climate-change, particularly among large finance institutions.
- Despite the growth in mega-deals for climate blended finance, it is crucial to emphasize the need for SMART impact targets, outcome-based financing mechanisms, and transparent impact reporting to ensure these investments are meeting their intended environmental and development outcomes, as highlighted in the same report authored by Ayesha Bery.
