Blended Financing: A Key Strategy for Managing Risks in the Energy Transition

In an interaction with Asia Business Outlook, Karna Mohan, VP-finance-APAC, Siemens Energy, shared his views and thoughts on how global initiatives can ensure sustainable sources of concessional funding to maintain the scalability of blended financing, as well as what strategies can be employed within blended finance models to ensure social equity and inclusion during the energy transition. Karna leads the development and implementation of financial strategies to drive the company's sustainable growth in the region. He also holds the key position of being the Finance Director for Siemens Energy Singapore, and serves on the boards of several companies in the region.

Blended financing structures allocate risks more efficiently between public and private stakeholders. What innovative mechanisms can blended financing introduce to minimize risks associated with regulatory uncertainty and market volatility in the energy sector?

Blended financing works well because it spreads risks in ways that help both public and private players. A good example is using public funds to guarantee private investors a minimum return, especially in uncertain markets. Programs like Contracts for Difference (CfD) are a prime example of this—they protect investors if market prices dip below a certain level.

There’s also the idea of regulatory insurance—creating funds to cover delays from unexpected policy changes. Flexible off-take agreements are useful too; they adjust pricing or volumes based on market demand,which helps producers and buyers manage risks. Green bonds, backed by governments, offer predictable returns and draw private capital in. And currency hedging from multilateral institutions helps tackle the risk of exchange rate volatility in energy projects.

Areal-world example is the Financing Asia’sTransition Partnership (FAST-P).With an initial $5billion from the Singapore government, multilateral development banks, and other partners; it combines concessional capital with private investment to support renewables and sustainable infrastructure. Siemens Energy is also involved in projects like ammonia combustion for low-carbon energy, where blended finance is helping tackle some of the big hurdles in the energy transition.

Access to blended finance is often limited by the availability of concessional funding.How can global initiatives ensure sustainable sources of concessional funding to maintain the scalability of blended financing?

Sustainability in concessional funding is key, and it’s all about getting creative. Public-private partnerships can play a big role, especially if governments can highlight successful projects that bring in private investors.Carbon credit markets are a solid opportunity—revenue from credits can fund future projects. Innovative taxation models, where a portion of corporate  or green taxes goes toward concessional funding, could also work.

The idea is to find ways to keep that funding flowing and scalable, which is critical for the long-term success of blended financing.

Blended financing is pivotal in enabling just transitions for economies heavily reliant on fossil fuels. What strategies can be employed within blended finance models to ensure social equity and inclusion during the energy transition?

Social equity is a huge part of the energy transition. Blended finance can help by creating job retraining funds for workers transitioning from fossil fuels to renewables, whichtackles both unemployment and equity issues.Involving local communities is essential too. Whether through ownership stakes or local employment, this gives people a direct role in the transition.Subsidized energy access programs are key to ensuring that low-income groups can benefit from cleaner energy without the financial strain.

Social impact bonds can link returns to equity goals, like job creation or community development, and a transparent grievance mechanism ensures that affected communities can voice concerns and stay engaged in the process.

Digitalization and data analytics are improving the efficacy of blended financing mechanisms. How can technological advancements further enhance the transparency and efficiency of blended finance projects?

Technology is undeniably a game changer for financing in general, especially in today’s market. Digitalization and data analytics are transforming how risks and returns are assessed, enabling investors to make more informed decisions with greater accuracy. Automated reporting tools reduce administrative burdens, streamlining collaboration between public and private stakeholders.

On the ground, IoT devices monitor energy project performance in real-time, providing early warnings about potential issues and keeping projects on track.Crowd sourcing platforms are also opening up new opportunities, enabling smaller players to participate and diversifying funding sources while driving transparency.

These technological advancements are not only making financing more efficient but also fostering trust and confidence among investors and stakeholders.