NbS Triple Win Toolkit: Economics and Finance 89 These solutions range from systemic transformations that span governments and institutions to more specific tactics that canbe applied by a catalysing entity at a project level: Financial and administrative solutions ‘Pooling’ projects to achieve scale: Even though specialised investors may invest in small-scale NbS, the wider spectrum of financial institutions that can potentially mobilise larger funds to NbS require these investments to have a certain scale (varying with the type of NbS, the risk profile and specific investor type125,137). To create pipelines of investment opportunities that meet these scale requirements of financial institutions, designated financial facilities can aggregate projects of different sizes into pooled funds. These professionally managed funds are invested in purpose-specific projects and allow investors to benefit from the economies of scale of investing in larger project portfolios. Doing so can decrease financial risk through diversification and lower transaction costs faced by investors127,128,130. The Kenyan Pooled Water Fund (KPWF) (see Model F) is an example of such a facility, whose aim is to provide local Water Service Providers (WSPs) access to long-term financing for sanitation infrastructure projects via the local capital markets. The issuance of a bond to local institutional investors will allow KPWF to on-lend the bond proceeds to WSPs to fund projects. The loans will then be repaid by the WSPs over a 15-year repayment period, thus providing bondholders with a return on investment. The pooling of these loans by the fund allows for the creation of adequate investment scale and lowers the default risk for institutional bondholders through diversification127. Risk mitigation tools: Different tools can mitigate risk and ensure risk-adjusted returns in line with investor requirements. In particular, blended finance arrangements can make use of grants, concessional loans and different types of guarantees by public and philanthropic actors to rebalance the risk-return profiles of investments. Concessional loans typically feature below-market interestrates or particularly long grace periods, and can be used as co-investments to attract private capital by lowering the overall risk profile of investments. First-loss guarantees are another common type of credit enhancement tool, whereby a third party agrees to bear the first loss of an investment by compensating lenders in the case of default. Besides mitigating risk, such tools can help private investors bridge the prolonged lead times until projects generate cashflows. Local governments can also provide investment tax credits on large capital investments required for NbS projects, thereby lowering the investment cost to compete with traditional investments127,129,131,136. The Althelia Biodiversity Fund (ABF) (see Model E) is an exampleof a blended finance facility which channels venture and growth finance into transformational businesses in the Brazilian Amazon. A more detailed description of this fund can be viewed in Financial Model E within this Toolkit. The fund’s structure allows investorswith varying risk-return requirements to invest in corresponding investment products. While the riskier investments are made bypublic investors, private investors provide financing for low-risk investments. Additionally, USAID is providing a 50% portfolio-level credit guarantee to investors127. Furthermore, Model D illustrates how Resilience Bonds or other insurance products can help mitigate investment risks for NbS.