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Jun 17, 2025
3
min
Infrastructure is in a transformative era. Driven by factors like remote work, the digital revolution, urbanization, and the global shift towards cleaner energy, infrastructure investments are not just attractive financially - they're also crucial for sustainable global development.
But here's a challenge: Massive infrastructure projects often struggle with funding. Traditional funding sources like government budgets are stretched thin. Enter blended finance and tokenization - two innovative solutions to bridge this funding gap.
What Exactly is Blended Finance?
Blended finance is a structuring approach that combines catalytic capital from public or philanthropic sources with private sector investment to fund projects that deliver both financial returns and positive social or environmental impact. By sharing risks and aligning incentives, blended finance makes it possible to crowd in private capital to sectors and regions that might otherwise be overlooked due to perceived high risks or low returns - such as clean energy infrastructure in developing economies.
Key features of blended finance:
Uses public or philanthropic funds to de-risk investments.
Attracts private capital to projects with high development impact.
Bridges the gap between commercial imperatives and sustainability goals.
Enables scaling of projects like mini-grids and solar installations that may lack traditional business models.
As David Giordano from BlackRock highlights, blended finance enables projects in emerging markets to attract private capital, promoting energy access and accelerating the shift towards a low-carbon economy.
Emerging markets are particularly crucial. With populations rising and younger demographics like Kenya (where the average age is just 19) - the need for localized, resilient infrastructure is growing. These regions may leapfrog legacy technologies, embracing solutions like microgrids, rooftop solar, and localized energy storage.
Blended finance has so far mobilized around $253 billion in capital to support sustainable development in developing countries.
Image Source: https://www.convergence.finance/blended-finance
Below are some examples that illustrate how blended finance has been structured and deployed:
1. Climate Investor One (CIO)
CIO is an $850 million blended finance fund dedicated to deploying capital in emerging markets within the renewables sector.
Its success led to the creation of a second fund, Climate Investor Two, and the management of the $1 billion GAIA fund.
These funds combine public, philanthropic, and private capital to de-risk investments in renewable energy, making them attractive to institutional investors.
2. ALTÉRRA Fund
Announced at COP-28, ALTÉRRA is a $30 billion investment fund providing catalytic capital for climate economy-related initiatives.
It exemplifies how large-scale blended finance vehicles can drive capital into climate action in developing countries.
Yet even with these achievements, to truly accelerate infrastructure financing globally, an additional layer of innovation is required.
Tokenization: Opening the Door to Private Capital
Tokenization is the process of converting real-world assets - like real estate, bonds, or commodities - into digital tokens on a blockchain. These tokens represent ownership and can be traded globally, 24/7, with unprecedented transparency and efficiency.
Fractional ownership: Investors can buy just a slice of an asset, making high-value investments accessible to more people.
Global reach: Digital tokens can be traded across borders, opening up new markets and opportunities.
Instant settlement: Transactions are faster and more cost-effective, thanks to blockchain automation.
How Do Blended Finance and Tokenization Work Together?
Blended finance and tokenization, when combined, create a powerful engine for mobilizing capital into infrastructure projects. With this, we can:
De-risking and Attracting Private Capital Blended finance uses public or philanthropic funds as a first-loss or risk-mitigation layer. This means that early-stage or higher-risk portions of a project are covered by government or development finance, reducing the risk for subsequent private investors. When these de-risked projects are tokenized, they become even more attractive because the risk profile is already improved, and the entry barriers for investors are lowered.
Fractional Ownership and Broadened Participation Tokenization converts large, capital-intensive infrastructure assets into digital tokens, each representing a fraction of ownership. This fractionalization allows a much broader range of investors (including retail, family offices, and smaller institutions) to participate in projects that would otherwise be out of reach due to high minimum investment thresholds. When combined with blended finance, this means that the catalytic effect of public funding is amplified: not only is risk reduced, but access is democratized.
Enhanced Liquidity and Exit Options Traditionally, infrastructure investments are illiquid, often locking up capital for years or decades. Tokenized infrastructure assets, however, can be traded on secondary markets, giving investors more flexibility to enter or exit positions as their needs change. This liquidity makes infrastructure projects more appealing to a wider pool of investors, further multiplying the impact of blended finance’s risk mitigation.
Transparency, Trust, and Efficiency Blockchain technology, which underpins tokenization, provides an immutable record of every transaction, ownership change, and cash flow. This transparency builds trust among stakeholders and reduces the risk of fraud or mismanagement. For blended finance structures - where accountability and impact measurement are crucial - this level of transparency is invaluable.
Governments must play a role not just financially, but also by establishing enabling policies, permitting frameworks, and regulatory environments. In the U.S. alone, over 40 GW of projects are delayed due to permitting bottlenecks despite having interconnection agreements.
At the same time, the rise of AI and cloud computing is reshaping infrastructure needs. The energy demand from data centers alone is projected to match that of Japan by 2026. In 2023, $35 billion was invested into data centers, with forecasts pointing to $50 billion annually by 2030. This opens major opportunities in energy generation, smart grids, and energy-efficient technologies.
Why This Matters Now
As the world faces urgent climate and development challenges, the need for innovative financing solutions is greater than ever. Blended finance and tokenization together provide a roadmap for mobilizing the vast sums required to bridge the sustainable development gap - enabling millions to leapfrog to clean energy and unlocking new markets for investors.
Platforms like Penomo are at the forefront, offering compliant, blockchain-based solutions that empower both project developers and investors to participate in the global transition to a low-carbon, inclusive economy.
About Penomo
Penomo is a digital asset infrastructure platform specializing in tokenized energy and AI infrastructure financing. By transforming physical infrastructure into compliant digital securities, we connect private capital markets with institutional-grade renewable energy and AI investments. Through tokenization, Penomo is streamlining capital access, enhancing liquidity, and enabling efficient financing for the global energy transition and AI expansion.
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