Chapter 08 · Finance, data & evidenceSustainable Finance & Investment
Concessional finance
Definition
Concessional finance is funding extended on terms more favourable than market conditions — typically below-market interest rates, extended tenors, grace periods or subordinated positions. The OECD Development Assistance Committee measures concessionality (including the 'grant element' of loans) to define official development assistance, distinguishing genuinely concessional flows from commercial finance.
References
definition of concessionality; market-creation rationale
Overview
What it means
The subsidy embedded in soft terms is what allows finance to reach projects and countries where commercial risk-adjusted returns are impossible.
How it is used
Deployed by multilateral development banks, climate funds and blended-finance structures to de-risk investment and create markets in low-income and fragile contexts.
Why it matters
Concessionality is the scarce ingredient that makes much climate and development finance possible at all.