Guidelines on EU blending Operations

OVERVIEW

What is it?

The Guidelines on EU Blending Operations Tools and Methods Series, Guidelines n°5. outline the project cycle for EU blending initiatives. Blending refers to the strategic use of a limited EU contribution to mobilise additional financing from partner financial institutions and the private sector, thereby enhancing the development impact of investment projects.
Through blending, EU funding is combined with non-grant resources—such as loans, equity, and guarantees from financial institutions, as well as commercial loans and investments—to generate a leveraged development effect. Within the framework of development cooperation, blending projects aim to contribute meaningfully to sustainable development outcomes.
The four sector reference documents complement the Guidelines on EU blending operations,

Blending and Support to Private Sector Development Tools & Methods Series - Reference document n°18
Blending in the Energy Sector Tools & Methods Series - Reference document n° 19
Blending in the Transport Sector Tools & Methods Series - Reference document n° 20, 2015
Blending in the Water and Sanitation Sector Reference document n° 21, 2015

What can it be used for?

The Guidelines provide a comprehensive overview of EU blending operations. They explain the concept and rationale behind blending and offer practical guidance on implementing blending operations throughout the project cycle, supported by numerous examples. The document clearly articulates the specific objectives of the instrument, which include:

Financial leverage: Mobilising public and private resources to maximise development impact and achieve more with fewer resources.
Non-financial leverage: Enhancing project sustainability, development outcomes, quality, and innovation, while facilitating faster project initiation.
Policy leverage: Supporting policy reforms aligned with EU and partner country priorities, as well as international commitments.
Development effectiveness: Strengthening coordination between European and non-European aid actors (including donors and financial institutions) and partner countries.
Visibility: Increasing the visibility of EU development cooperation efforts.

When can it be used?

The Guidelines can be applied throughout the intervention cycle, starting from the pre-programming phase, whenever the blending instrument is considered appropriate to the specific context. Blending is particularly well suited to projects that offer high potential for development impact but generate a below-market expected rate of return, making them unattractive to public lenders and/or commercial financiers.
In other cases, the actual or perceived risks associated with certain projects may be too significant to attract financing at the required scale. For example, this may include firms adopting innovative energy or resource-efficient technologies, or farmers introducing sustainable agricultural practices—activities that may be deemed too risky due to unproven regulatory frameworks or emerging technologies.

Who can use it?

All partners involved in a blending operation have distinct roles and responsibilities throughout the EU blending project cycle, which consists of seven stages. These responsibilities are shared among key stakeholders and clearly illustrated in the Guidelines.
The main stakeholders in blending operations include:

European Commission services (both Headquarters, including thematic units, and EU Delegations),
Financial institutions (FIs),
Partner countries and regional organisations,
EU Member States,
Other Commission services, and
The European External Action Service (EEAS).

What are its strengths?

The Guidelines facilitate a comprehensive understanding of the advantages of blending, both from conceptual and operational perspectives. They enable an assessment of the specific benefits for the European Union, including:

Broader strategic engagement: Blending has enabled the EU to engage more extensively and strategically, particularly in the financing of large-scale infrastructure projects.
Enhanced value of grant-based cooperation: In many cases, blending has significantly enriched the EU's traditional grant-based development cooperation. The added value has stemmed from its role in leveraging policy reforms, enabling the design of high-quality projects, mobilising additional finance to improve access to funding, and enhancing coordination across EU development efforts.
Support for private sector development: Blending grants have contributed to private sector development, notably within the financial sector.
Assurance of project quality: The lead international financial institutions (IFIs) approved by the EU follow internal procedures that are instrumental in maintaining the high quality of blending operations.
Achievement of results: To a considerable extent, blending projects have proven successful, having already achieved—or being on track to achieve—their intended results. There is also evidence that the outputs of these projects are being actively used and valued by beneficiaries.

What are its limitations?

The Guidelines offer detailed guidance for each stage of the blending cycle, as well as on cross-cutting issues such as risk analysis, visibility, climate change, and private sector engagement. However, all these elements must be assessed within the specific context of each intervention and require thorough, context-sensitive analysis.

PRACTICAL APPLICATION

Key elements

The Guidelines include a range of instruments and tools designed to support both the development and implementation of the blending cycle, while promoting harmonisation across different blending operations. Operational managers will find within the Guidelines key resources such as the Project Application Form and Guidance Note, the Assessment Framework, a sample Delegation Agreement, and various management templates. A list of relevant reference documents is also provided to further support implementation.

Requirements

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Financial costs and sources:
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Tips and tricks
Some tips and tricks across the cycle:

Stage / Theme	Some tips and tricks	Why It Matters
Pre-Programming	Align blending with sector and national priorities early on.	Ensures strategic fit and ownership by partner countries.
Pre-Programming	Conduct preliminary financial and risk analysis with FIs.	Helps assess viability and relevance of blending at an early stage.
Programming	Involve EU Delegations, thematic units, and FIs from the start.	Promotes coherence and efficient project formulation.
Programming	Define clear development objectives and blending rationale.	Facilitates justification of the EU contribution.
Identification	Use the blending Assessment Framework to guide early project screening.	Ensures alignment with blending eligibility and criteria.
Identification	Consider potential for financial, non-financial, and policy leverage.	Maximises the impact and value addition of EU support.
Formulation	Use standardised templates (e.g. Project Application Form, Delegation Agreement).	Promotes harmonisation, reduces errors, and speeds up approval.
Formulation	Integrate cross-cutting issues: gender, environment, climate, and private sector inclusion.	Enhances sustainability and policy coherence.
Financing Decision	Engage decision-makers with well-prepared documentation including financial modelling.	Increases likelihood of timely approval and financing commitment.
Financing Decision	Use visibility guidance to plan communication from the outset.	Ensures EU contribution is properly acknowledged.
Implementation	Maintain close coordination with FIs and partner country institutions.	Facilitates disbursement and adaptive management.
Implementation	Apply risk mitigation tools and regularly update risk assessments.	Protects against implementation delays and reputational risk.
Monitoring and Evaluation	Establish M&E frameworks jointly with FIs using common indicators.	Enhances comparability and tracking of development results.
Monitoring and Evaluation	Collect lessons learned and feed them into future programming cycles.	Supports learning and continuous improvement of blending practices.
Private Sector Support	Use blending strategically to de-risk private investment (e.g. first loss, guarantees).	Encourages private sector participation in high-impact, high-risk sectors.
Private Sector Support	Tailor blending instruments to the maturity and nature of the market (e.g. SMEs vs. large infrastructure).	Increases the effectiveness and absorption capacity of funds.
Climate/Environment	Integrate climate risk screening and resilience building in early design.	Aligns projects with EU Green Deal and SDG targets.
Climate/Environment	Use blending to support green finance instruments (e.g. green bonds, energy efficiency credit lines).	Drives innovation and market development for climate action.

EU RESOURCES

The European Commission. Tools and Methods Series, Guidelines N.5 2015: Guidelines on EU Blending Operations
Blending and Support to Private Sector Development Tools & Methods Series - Reference document n°18, 2015: Blending and Support to Private Sector Development
Blending in the Energy Sector Tools & Methods Series - Reference document n° 19, 2015 : Blending in the Energy Sector
Blending in the Transport Sector Tools & Methods Series - Reference document n° 20, 2015: Blending in the Transport Sector
Blending in the Water and Sanitation Sector Reference document n° 21, 2015: Blending in the Water and Sanitation Sector

INTPA Academy on Blending
Blending in the Water and Sanitation Sector
Fundamentals of blending and budgetary guarantees
General Introduction to EFSD+

Introduction to blending in Latin America and the Caribbean