CDPQ Asia head: Blended finance's big potential for EMs

The Canadian pension fund investor is on a mission to steer private capital towards tackling sustainable development, with the goal of turning climate action rhetoric into reality.
CDPQ Asia head: Blended finance's big potential for EMs

Canadian pension fund investor the Caisse de dépôt et placement du Québec (CDPQ) has taken a lead role in the Blended Finance Task Force under the Sustainable Markets Initiative (SMI), which aims to mobilise private capital to tackle some of the world's most pressing environmental challenges.

“‘Blended finance’ is an interesting animal on its own. Depending on who you talk to, you will get different definitions,” Leong Wai Leng, managing director for Asia Pacific at CDPQ, told AsianInvestor.

In 2015, the term "blended finance" was introduced as a method to fund the United Nations' Sustainable Development Goals (SDGs), which estimates that a $4.2 trillion funding gap per annum exists in sustainable development for emerging economies.

Eight years on, blended finance consistently remains a prevalent topic in numerous prominent investor and governmental discussions and strategies. However, it has not fully achieved its anticipated potential in bridging the shortfall in funding for developing countries, with only around $198 billion being mobilised to date, according to data from Convergence, a Canada-based blended finance network.

The Blended Finance Task Force initiative is not only ambitious, but necessary, and CDPQ’s position as a leading global investor as well as its sustainable investment philosophy positions the fund well to take on a leadership role, according to Leong.

“We see ourselves as not only providers of sizable private capital, but also as a catalyst for the initiative,” she said.

“We are active participants in several global alliances and we can provide thought leadership and engage with other stakeholders that are needed. Together, we can all move in the same direction of deploying capital while being able to achieve the returns we need to meet our fiduciary duties,” said Leong.


With a current AUM of $317 billion, CDPQ's financial muscle is evident. And while its investments in Asia currently stand at 14%, with a bottom-up approach that focuses on the right partners and opportunities that meet the fund’s risk-reward criteria, the potential for growth — and for meaningful impact through blended finance — is substantial.

As a catalyst, CDPQ is not acting in isolation. "It's a role we can't fulfil alone," Leong acknowledges, highlighting the collaborative essence of blended finance.

Leong Wai Leng,

"We will need significant amounts to finance climate change transition," she said. “It's a blend of various investors coming in, and all of us have different investment preferences and different risk-reward expectations."

The task force envisions multiple layers of stakeholders, including governments, multilateral and development financial institutions, philanthropies, family offices, and development agencies, each bringing unique strengths and risk appetites to the table.

Leong stresses the importance of government involvement, particularly for projects that involve public infrastructure, where long-term demand guarantees from governments are critical.

She also notes the need for support from multilateral institutions that bring a deeper understanding of the emerging market landscape.

First-loss guarantees, foreign exchange insurance, and project preparation are among the other critical needs for making blended finance work, she said.

“When you're looking at potential investments in this space, one of the big challenges of very long-term equity or financing, is that the foreign exchange tends to be very, very volatile. But the market is just not deep enough to be offering you anything beyond two or three years — if we're lucky — in terms of the hedging,” said Leong.

Leong also described ‘project preparation’ as the unsung hero of this structuring approach.

“A dedicated team is essential for project preparation and structuring. This is one of the many layers necessary for the effective implementation of blended finance,” she said.


In discussing the unique challenges faced by Asia, Leong notes the region's pressing need for energy transition and climate mitigation, coupled with the financial constraints of its emerging economies.

"Financially, in terms of fiscal capabilities, many of these countries are not really in a position where the government alone can do a lot of these projects," she explains.

Blended finance, therefore, becomes a tool to bridge that gap, enabling projects that might otherwise be financially unfeasible.

Despite CDPQ's heavy involvement in direct investment across various sectors, including infrastructure and real estate, Leong acknowledges that "not much has been deployed" in terms of blended finance in Asia.

However, she remains optimistic, believing that with the right mix of stakeholders, larger pools of capital can be mobilised to meet the extensive needs of the region.

Leong further highlights the role of multilateral development banks as pivotal in this equation.

"We've actually co-authored a set of recommendations on how to reform the multilateral development banks," she said.

“If these banks can take on riskier tranches, private investors like CDPQ can then step in at a larger scale, leading to a significant broadening of the investment ecosystem,” said Leong.


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