This article was written in collaboration with Ramesh Subramaniam, Raj Vikram Singh, and Akash Mishra from the Coalition for Disaster Resilient Infrastructure (CDRI), a global coalition committed to strengthening infrastructure resilience against climate and disaster risks.
Traditional infrastructure-funding models rarely factor in resilience to geoclimatic events. Yet, the impact of extreme weather on existing and future global infrastructure could generate economic losses as high as 19% of GDP by 2050, according to some sources. Across low-and-middle-income countries (LMICs) alone, annual losses of $127 billion—about 14% of global annual average losses, according to the CDRI—underscore the structural drag on development caused by climate-related disruptions to critical energy, transport, telecom, and water system infrastructure.
A substantial increase in resilient infrastructure investments could help manage and mitigate these risks, while supporting long-term value and stability. In fact, the estimated annual investment necessary to meet current infrastructure needs, achieve the United Nations’s 2015 Sustainable Development Goals, and reach net-zero carbon emissions by 2050 is around $9.2 trillion, according to CDRI data. Of this, $2.76 trillion must be invested in LMICs up to 2050. Investment for providing resilience upgrades for existing infrastructure alone—not factoring in new construction—must rise 13 fold by 2050 to secure the cumulative economic output at risk.
Investor recognition of these physical risks is growing, along with the intent to scale financing for resilient infrastructure. In parallel, we find that the resilience-related components of infrastructure transactions, though quite often not commercially viable on a standalone basis, have significant cashflows. And they can be made viable for mainstream capital—unlocking and scaling investment flows—when funds are structured appropriately.
This is especially true when commercial finance is blended with concessional finance, leveraging the climate and socioeconomic benefits of resilience. This blended finance approach offers the opportunity to deploy suitable instruments to deliver multiple benefits: higher returns, downside protection, liquidity and volatility management, lower insurance and financing costs, and, ultimately, greater terminal value.
Unfortunately, the market still lacks sufficient knowledge of how best to structure blended finance funds to support resilience and secure these advantages. As a result, BCG, in partnership with the CDRI, has developed a unified framework for considering blended-finance design for resilient infrastructure. The framework outlines how resilience considerations translate into fund architecture, detailing the features that various blended models must build into their design.
In this article, we delve deeply into the potential role of blended finance in the context of resilient infrastructure, laying out potential blueprints for such funds along with investment plays for various stakeholders in the ecosystem of infrastructure resilience.
Why Resilient Infrastructure Demands Investor Attention
The increases in global annual average losses (AAL) and infrastructure exposure clearly provide enough grounds today to merit investor attention, even as physical climate risks become too complex to predict precisely.
Protecting Infrastructure Assets. Embedding resilience can play a critical role in protecting existing and future assets, reducing risk while capturing early-mover advantage. Extreme weather has already caused major global losses, damaging infrastructure that was unprepared for events of this scale. In addition, indirect impact—particularly from supply chain disruptions—often goes unquantified, potentially disguising the full extent of the economic damage.
Reducing Strain on LMICs. Physical impact to infrastructure is increasing in frequency and severity in some regions, and the risks are becoming more complex to forecast, predict, value, and insure against. While the Americas and Asia currently face the greatest AAL due to extreme weather events, LMICs will face the greatest strain going forward as rising hazards collide with high financing costs and limited funding. And their insurance pools are not as developed in terms of coverage nor as deep in comparison to other regions.
Guarding Critical Subsectors. In addition, climate losses and exposure tend to cluster in a few highly critical subsectors, including transport and energy, which account for almost 78% of present-day global AAL and nearly 80% of the $557 trillion in hazard-exposed infrastructure assets (excluding buildings), according to the CDRI. Meanwhile, climate patterns are shifting and becoming more erratic, resulting in microclimatic change. Such rapid swings between extremes highlight how difficult it has become for asset owners, insurers, and investors to plan, price, and prepare for climate risk.
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Resilience Goals Face a Sizable Shortfall
Developing resilient infrastructure to meet the climate challenge will require substantial funding—at affordable rates—that factors in suitable risk-mitigation measures. But we find a striking imbalance between financing to mitigate climate change and the financing needed to adapt or build infrastructure for resilience. In fact, adaptation and resilience (A&R) accounted for only a marginal share of climate financing in 2023, at only $65 billion, although annual global adaptation needs are projected to reach $248 billion by 2050, according to the Climate Policy Initiative.
Public Sources Required. Adding to the challenge, much of present-day adaptation finance comes from public sources, while private capital remains largely untapped—constrained by fragmented planning, a limited number of investment-ready projects and bankable project pipelines, and uncertainty over returns. Filling the funding gap at affordable rates and factoring in suitable risk mitigation measures is therefore essential.
Insurance Protection Gaps Widening. In a separate challenge, insurance protection gaps have widened, with just 44% of losses due to extreme weather insured in 2024, and pricing becoming more volatile. In Florida, for instance, repeated storms pushed policy non-renewal rates up 275% and premiums up 70% between 2018 and 2023. This statistic underscores the difficulty of maintaining coverage when hazard frequency, severity, and geographic patterns are evolving faster than historical models can adjust.
Investors See an Opportunity
Despite this shortfall, we see a tremendous opportunity to retrofit and reinforce existing assets and deploy new infrastructure investments with strengthened resilience across their lifecycle—especially given that most of the resilient infrastructure required by 2050 is yet to be built. And we find that investors and financial institutions are already gearing up for the challenge.
Positive Returns. A range of approaches currently exists for increasing infrastructure resilience, often with a positive commercial business case. Even in those instances where the business case is presently marginal, the surge in AAL is driving returns into positive territory. In fact, resilience action today can help businesses avoid an EBITDA plunge of up to 25% resulting from direct climate risks, while climate-resilience investments could potentially yield between $2 and $19 for every dollar invested.
Increasing Interest. According to a survey conducted by BCG and the Rockefeller Foundation with more than 100 climate finance leaders, investors across regions are increasingly seeking investment opportunities in adaptation and resilience—ranging from 40% to 42% of respondents in advanced economies such as the Americas and Europe to 40% to 45% in major emerging markets such as India and sub-Saharan Africa. These results indicate a clear shift toward preparedness as climate volatility intensifies. Meanwhile, climate finance in general has already expanded at around a 19% CAGR over the six years to 2023, reaching $1.9 trillion.
Credit Agencies Gearing Up. Credit-rating agencies such as Moody’s are beginning to integrate physical-risk metrics into their assessments, signaling a gradual move toward risk-aligned pricing. And tools like the Physical Climate Risk Appraisal Methodology (PCRAM 2.0), developed by the Institutional Investors Group on Climate Change, are helping standardize the way physical climate risk is evaluated at the asset and portfolio level by outlining common metrics, data sources, and modeling approaches.
Blended Finance in Infrastructure Today
We believe blended finance has a powerful role to play in meeting the resilience funding shortfall. It is generally well recognized as having substantial potential for mobilizing capital from various sources, and recent years have seen a steady expansion in its deployment across various climate-relevant sectors. In fact, momentum is building, with blended-finance transactions reaching almost $250 billion in volume in 2024.
Energy and non-energy infrastructure alone accounted for about 40% of these blended finance flows, according to Convergence (a global blended-finance network), with mitigation accounting for 64% and adaptation accounting for just 13% between 2019 and 2024, the latter typically in smaller deals.
At the same time, a new class of resilience-oriented blended funds is beginning to take shape. Funds such as the Infrastructure Climate Resilient Fund, Climate Investor 2, and the GAIA Fund combine concessional capital, explicit resilience mandates, and structured risk-sharing facilities to unlock infrastructure investment in climate-vulnerable markets. Similarly, while investor consideration for making greenfield infrastructure resilient is higher, there is a gradual shift for specific blended funds that look to lock in a portion of their portfolios for resilience in existing assets. These emerging models illustrate what becomes possible when resilience is designed into the architecture of a fund.
Nonetheless, more is needed. In parallel, accelerating the maturation of blended infrastructure finance to meet the scale of the rising climate challenge would help address the growing demand from adaptation and resilience investors.
A Deep Dive into 40 Funds
To understand more clearly how players are deploying blended finance—and what it will take to orient it further toward resilience—we analyzed 40 existing infrastructure-focused blended funds across a variety of parameters. Six key trends emerge from a review of these funds. Note that single funds often cater to multiple regions and/or sectors. (See the slideshow below.)
- Players are beginning to build resilience into the investment thesis of blended funds as climate risk becomes more material for investors, with 23% of funds reviewed including infrastructure resilience elements.
- Deployment is concentrated in Africa (80%) and Asia (70%), indicating major future infrastructure buildouts in these regions and significantly high expected value of losses in case of slow action or inaction. Given the range of risks in these regions around extreme weather events, foreign exchange, and sociopolitical matters, there is a shortage of suitable risk-transfer markets. However, the massive scale of the opportunity is also expected to drive the development of suitable risk-mitigation instruments to serve these regions for resilient infrastructure.
- Energy (75%) and transportation (50%) dominate sector focus, reflecting where AALs and exposures are highest and where resilience should be embedded first.
- Most funds prioritize new asset builds, with 35% of funds focusing exclusively on greenfield and the remaining having varying degrees of brownfield (existing asset) allocation. New asset creation allows resilience measures to be integrated more easily; however, existing infrastructure today sits on enormous climate exposure, with global estimates placing over $550 trillion of installed assets at risk. This calls for a more balanced focus between greenfield and brownfield—which may be easier to achieve as the sector matures because greater maturity would help activate major pools of capital from institutional investors for brownfield projects.
- Infrastructure lifecycle coverage is uneven, especially in the later stages. Across the lifecycle, more than 50% of funds reviewed focus on the strategy, planning, and design phases, while over 60% focus on procurement, construction, operations and maintenance, and utilization. In contrast, only about 15% of funds cover the end-of-life phase.
- The CDRI has created a conceptual Absorb-Respond-Recover framework for the infrastructure lifecycle. The “absorb” phase includes the ability of assets to withstand shocks while maintaining core functions, the “respond” phase focuses on maintenance of essential functions during shocks and deployment of emergency operations and protocols, and the “recover” phase is focused on rapid restoration of service levels after shocks. The framework reveals a similar imbalance to the lifecycle itself: more than 50% of funds have coverage of the “absorb” phases, but significantly fewer cover the “respond” phase, at around 20%, and the “recover” phase, at only 15%.
- At the same time, we find a good balance between debt and equity instruments, with an approximate one-third focus each on debt, equity, and a combination of debt and equity. Three de-risking instruments appear consistently:
- first-loss facility (absorbs initial losses in a transaction)
- technical-assistance facility (provides project preparation support, expert advice, knowledge and capacity building, and access to resources and tools)—each about 60% of the analyzed funds
- guarantees to transfer risk and enhance access to affordable finance (about 30%)
Charting a More Intentional Funding Approach
In the face of extreme weather events becoming more pronounced—as evidenced by rising infrastructure losses—there is increasing demand for creation of disaster- and A&R-aligned investment-grade assets and for factoring in appropriate risk-mitigation measures. While blended finance is beginning to flow to the key regions and sectors in need, resilience often remains inconsistently incorporated across mandates, instruments, and lifecycles. Progress in this area may benefit from a more intentional approach—one that anchors funds in a clear purpose, aligns capital to lifecycle needs, and places resilience at the center of design.
Our benchmarking reveals that a fund’s objectives, especially its risk-return ratio, drive key decisions on how it should be structured and whether blending is necessary. In addition, a tailored investment thesis that accounts for the evolving challenges of resilient infrastructure is crucial to setting up the fund for success. Perhaps even more important, design choices around the use of proceeds—sectors and regions, investment strategy, and instruments—will establish the appropriate foundation, helping to unlock the opportunity at hand.
These primary considerations form the bedrock of today’s resilient-infrastructure-focused blended funds. Translating them into practice requires developing fund structures that are customized for different risk profiles, market conditions, and lifecycle needs.
To illustrate this process, we explore three potential archetypes of blended funds for resilient infrastructure. Their applicability depends on a variety of factors, including the availability of concessional capital, the market’s maturity, institutional capacity, and regional regulations. (See the slideshow below.)
Dual-Window. A dual-window blended mechanism embeds resilience across all stages of the infrastructure lifecycle by financing both greenfield and brownfield assets within a single fund and combining concessional junior capital, senior tranches, and targeted de-risking instruments. This model improves bankability and enables capital recycling; however, it is largely perceived to be unworkable in fragile and underserved markets, where risks vary sharply by sector and geography, pipelines are fragmented, and a single pooled structure limits the flexibility to tailor risk allocation and policy engagement.
Special Purpose Vehicle (SPV). The SPV-based blended fund emerges as a possible evolution of the dual-window. This type of fund allows projects to be aggregated under multiple sector-, regional-, or project-specific SPVs within a common blended-finance architecture. This structure enables differentiated capital stacks, tailored political and foreign-exchange risk mitigation, and targeted technical assistance, making it particularly effective in fragile contexts and for early-stage resilience investments. However, it is seen as transaction-heavy in nature, and its limited ability to standardize a de-risking approach across markets restricts its scalability.
Hub-and-Spoke. The challenges of the SPV-based fund create a case for a platform hub-and-spoke model, which pools assets from several investment vehicles into one central vehicle. This option is designed on the principles of scalability and bankability, streamlined governance, and the capacity to efficiently absorb and deploy large pools of capital. As it is a fund-of-funds, it provides both junior, or subordinated, capital and affordable, standardized de-risking instruments at scale. In addition, it sets common resilience standards and systematically crowds in private capital—helping move resilient infrastructure finance from isolated transactions to a repeatable, market-shaping ecosystem.
The Blended Finance Framework for Resilient Infrastructure
BCG and the CDRI have created a framework for applying blended finance to resilient infrastructure that establishes a common design architecture, translates benchmarked insights into practical indicators, and offers a shared language for aligning public, private, and concessional actors.
The framework operates within three tiers:
- Four framework principles set the strategic intent.
- Eight building blocks translate these principles into practical design choices.
- A series of non-exhaustive levers within those building blocks illustrate how funds can be structured in practice. (See Exhibit 1.)
The framework provides a comprehensive roadmap for developing blended finance vehicles that are commercially grounded, mobilization-focused, locally responsive, and capable of delivering measurable resilience outcomes.
Importantly, the framework offers a clear way to design mechanisms that are intentional about resilience. By bringing structure to the way that a fund’s purpose, capital deployment, and risk-sharing are aligned, it helps ensure that future blended-finance funds are built on a consistent foundation. Ultimately, it provides a practical starting point for shaping funds that can mobilize capital at the scale required to strengthen infrastructure systems under rising climate risk.
The Keys to Unlocking a Stable Capital Flow
Mobilizing capital for resilient infrastructure requires a coordinated effort across the financing ecosystem. While the blended-finance framework establishes the design principles for building resilience into financial structures, translating these principles into action will depend on the choices made by investors, corporate actors, concessional providers, and regulators. Each will have a distinct but interdependent role in shaping how resilience is financed, priced, and embedded into infrastructure systems.
Meaningful progress will require investors to shift portfolio strategies, deploy new risk-sharing tools, and engage early in the project lifecycle. Such progress also needs to be supported by public and concessional actors generating clearer standards, better data, and targeted de-risking to ensure that resilient infrastructure becomes bankable at scale.
By aligning actions across the ecosystem, players can unlock a more stable flow of capital into high-risk markets, accelerate climate-proofing of existing assets, and ensure resilience is treated as a core investment value rather than an externality. Six potential actions could help them coordinate. (See Exhibit 2.)
- Strengthen capital deployment into resilient infrastructure through standardized, investment-grade vehicles. Develop structured, multi-tranche investment vehicles that embed concessional capital and risk-sharing instruments, streamline due diligence and documentation, and offer long-tenor and local-currency financing to expand investor participation.
- Expand risk-mitigation architecture to lower the barriers for private-capital participation. Scale a comprehensive risk-mitigation suite—including guarantees, catastrophic/parametric instruments, resilience bonds, reserve/liquidity facilities, and captive insurance solutions—to stabilize cashflows and spread climate and operating risks across the project lifecycle.
- Build resilience into project pipelines through early-stage analytics, design support, and localization. Fund early climate-risk and pre-feasibility analytics, provide design-stage technical assistance, and invest in local complementary infrastructure and workforce and supply-chain capacity to surface investable pipelines. Extend defect-liability periods to the entire asset for a longer duration to better address construction and quality issues.
- Embed resilience-performance incentives and linked financial structures. Integrate resilience KPIs into financing terms by linking coupons or rate adjustments to resilience outcomes and standardizing disclosures and monitoring and evaluation systems that track sector-specific, cross-lifecycle resilience gains.
- Scale blended public-private partnership (PPPs) and cross value-chain partnerships for resilient infrastructure delivery. Structure PPPs that allocate resilience risks appropriately. Incorporate resilience materials and standards through original equipment manufacturer (OEM) and insurer partnerships, and coordinate actors across the value chain to enable local participation and incentivize private participation.
- Improve availability and access to finance through diversified capital sources and enabling regulations. Expand access to resilient-infrastructure finance by strengthening climate-risk disclosure and taxonomies, enhancing local-currency financing via local financial institutions and foreign exchange facilities, and clarifying resilience requirements to mobilize private capital at scale.
A Time for Decisive Action
While the effort to finance resilient infrastructure clearly faces a complex set of issues, climate risks are accelerating and infrastructure systems are coming under increasing strain. Meanwhile, less than 4% of total global climate financing is currently going into the A&R space. The present moment therefore demands determined and coordinated action. The choices made now about capital allocation, risk-sharing, and project design will define whether future infrastructure withstands climate volatility or amplifies it.
Actors across the infrastructure-financing ecosystem can play a role in reshaping the way resilient infrastructure is financed and delivered. With the right investment plays, blended-finance models, and ecosystem alignment, the world has a unique opportunity to build infrastructure that is ready for a changing climate. The CDRI offers some guidance for individual actors in its Global Infrastructure Resilience Report (GIR) 2025, in which BCG was a key collaborator.
For governments, the CDRI recommends integrating resilience considerations into overall infrastructure planning and the macro-fiscal framework. In parallel, although resilience is generally seen from a risk perspective, it recommends that governments consider expanding investments in resilience across additional dimensions of the infrastructure value chain—starting with project identification, design, procurement, execution, operations and maintenance, and end-of-lifecycle measures.
In addition, deploying effective resilience-financing instruments necessitates clear policy and regulatory frameworks, such as contingency funds, catastrophe-deferred drawdown options, regional risk pools, and other products. These products are most effective when “layered” to respond appropriately to the given frequency and severity of events. Many countries’ governments are also exploring financial solutions such as sustainable bonds or dedicated funds to strengthen resilience.
For corporations, the CDRI notes several challenges to resolve. For instance, 40% of the companies surveyed for the GIR lack detailed standard operating procedures for extreme weather response. And nearly two-thirds lack access to providers of resilience solutions. One way to overcome such challenges is for corporations to adopt a more systemic view of resilience across every stage of the business lifecycle, from strategy and planning to operations.
Tremendous collective efforts will be required to bolster investment in resilient infrastructure around the globe. The world cannot afford to keep losing an estimated $300 billion to $800 billion (half of it in the developing world) every year, according to the CDRI, to extreme weather events. Innovative solutions that blend financing sources effectively will play a very significant role, creating a timely opportunity for stakeholders to accelerate their efforts.
The authors would like to thank the following BCG colleagues for their contributions to this article: Veronica Chau, Greg Fischer, Charmian Caines, Dave Sivaprasad, Sahradha Kaemmerer, Korbinian Stinglhamer, and Varad Pande.
