Making an Impact at the Enterprise Level
January 9, 2020 | Perspectives | Impact Investments

Debra Schwartz, Director of Impact Investments, reflects on our investments in preserving affordable housing and using catalytic capital to address global challenges.


Impact investing is, by its nature, ambitious and aspirational. Leaders in the field are continually developing and testing new financing models, as others build on lessons learned in order to drive social and environmental progress.

That has certainly proven to be true at the MacArthur Foundation. Our current work to inform and inspire the use of catalytic capital draws on 35 years of impact investing experience, including decades of support for affordable housing in the United States.

For the past several years we have been winding down our housing programs, passing the baton to new funders and investors. As part of this transition, we have taken a close look at long-term outcomes for one of our most significant commitments, Window of Opportunity, through which MacArthur invested $187 million to support housing preservation efforts over the last 20 years. A 2016 evaluation assessed the overall initiative to that point, but we also wanted to drill down further, examining how a set of impact investments we made from 2002-2009 (in the form of program-related investments, or PRIs) affected a cohort of 20 nonprofit housing developers.

The top-line results are quite encouraging: the developers leveraged $42 million from MacArthur to attract $5.6 billion in development capital that helped preserve more than 50,000 units of affordable rental housing. That is good news. But I think it is also important to understand the how and why of those outcomes, especially now, as so many communities grapple with a deepening affordable housing crisis, and high-profile technology investors attempt to enter the sector with significant capital commitments to take on these challenges.

First, our PRIs were enterprise-level investments. The aim was to build the overall housing preservation capacity of nonprofit developers and give them the ability to act in a nimble and timely way when acquiring at-risk property. We did not restrict our investments to narrowly focus on pre-identified, individual housing projects. Our approach proved to be critical, as the developers not only used the capital to launch or expand preservation plans but also to improve their liquidity, bolster their balance sheets, and expand their organizations. They emerged stronger and better able to advance a wide range of housing goals.

The bottom line remains that the world needs more impact investment of all kinds.

Second, the real story is about the value of patient, flexible, equity-like capital for high-performing nonprofits. We saw a similar effect with the PRIs we made to support Community Development Financial Institutions (CDFIs) dating back to the late-80s. Nascent organizations used low-cost PRIs to provide financing for underserved markets and build track records of repayment and overall success. Many grew into sophisticated financial intermediaries that today raise and deploy billions of dollars each year to address community challenges, with some even earning strong commercial credit ratings and accessing mainstream capital markets.

In both cases—housing developers and CDFIs—we see the power of catalytic capital to seed, scale and sustain promising opportunities for impact. And the Catalytic Capital Consortium (C3), which we launched in 2019 in collaboration with the Rockefeller Foundation and the Omidyar Network, draws on all of that experience in order to accelerate the flow of catalytic capital globally, supporting positive impact that would not otherwise be possible.

To advance C3, MacArthur is investing up to $150 million in funds and intermediaries that demonstrate the power of catalytic capital to unlock impact and additional investment. In March, we announced $30 million for Zero Gap, a Rockefeller Foundation-led program focused on groundbreaking financial innovations that further the UN Sustainable Development Goals. In October, we announced $20 million for Terra Silva, a collaboration with the Packard Foundation to fight climate change by conserving and restoring critical tropical forests around the world. We expect to announce several more commitments in the first half of 2020, drawing from an impressive, global pool of proposals we fielded through an invitational process earlier this year.

We are grateful for the tremendous interest in this new initiative and have been excited to connect with bold leaders around the world to learn about their perspectives and experience with catalytic capital. We look forward to sharing the results of our investments plus new research and knowledge-building projects we expect to support through a C3 grantmaking program that we will launch with our strategic partners in the near future.

As we move forward, the bottom line remains that the world needs more impact investment of all kinds, including catalytic capital, which extends the reach and deepens the impact of market-oriented investment. Without it, impact investing cannot realize its full potential. Our goal is to empower more investors to help tackle pressing global challenges and protect people and the planet for many years to come.

We invite you to help us continue the conversation about catalytic capital and join us in this effort in the months and years ahead.


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