Catalytic capital—investment capital that is patient, risk-tolerant, concessionary, and flexible in ways that differ from conventional investment—is an essential tool to bridge capital gaps and achieve breadth and depth of impact, while complementing conventional investing. The Catalytic Capital Consortium will help more funds and social enterprises attract the financing they need to address some of the world’s most pressing challenges as it spurs learning about catalytic capital in the impact investing community. The initiative aims to demonstrate the power of catalytic capital to extend and deepen the reach of the impact investing field.
Although impact investing is growing in positive ways, there is a significant gap in financing opportunities for many promising impact enterprises and funds. At a time when progress must be made toward the UN Sustainable Development Goals (SDGs), impact investors are eager to support promising enterprises and also recognize the urgent need for innovative finance solutions to address the annual funding gap of $5 trillion to $7 trillion that is hindering the ability to reach the SDGs by 2030.
Catalytic capital can help meet the demand for more capital across the risk-return spectrum, complement and pave the way for conventional investment, and mobilize additional capital through a range of blended finance solutions.
About the Catalytic Capital Consortium
The Catalytic Capital Consortium is an investment, learning, and market development initiative bringing together leading impact investors who believe that greater, more effective use of catalytic capital is essential to realizing the full potential of the impact investing field, including its role in achieving the Sustainable Development Goals (SDGs).
Conceived of by MacArthur, the initiative supports investors currently using catalytic capital and aims to inspire those who are interested in rigorous, flexible investment strategies that drive even deeper, more sustainable impact for people and the planet. We hope to demonstrate the power of catalytic capital as synergistic with other forms of investing across the full continuum of capital (including at-market rates of return) to safeguard the environment and those most in need.
We are investing up to $150 million on a matching basis in funds or intermediaries that demonstrate a powerful use of catalytic capital across diverse sectors and geographies. For enterprises, fund managers, and markets, our catalytic capital can play a de-risking role and help build track records, as well as scale, ideally setting the stage for other impact and conventional investors to provide more capital concurrently or in the future.
The Rockefeller Foundation and Omidyar Network join us as strategic partners in the initiative. Together, we will collectively provide an initial $10 million in grants to fuel learning and market development related to catalytic capital, helping to answer critical questions about the scope of the need for catalytic capital, when and how catalytic capital can be most effective, and what additional tools and practices are needed.
As part of the initiative, MacArthur is investing up to $150 million in investments on a matching basis in funds or intermediaries that demonstrate a powerful use of catalytic capital across diverse sectors and geographies. We believe that collaboration is essential to the successful use of catalytic capital. That is why we use the term “Field Partnership” to describe the efforts that we support with our investments. We expect to approve investments for each Field Partnership in the form of debt, equity, or guarantees depending on the opportunity. Our current Field Partnerships include:
- ALIVE Ventures: $5 million equity investment into Acumen Latin America Early Growth Fund LP, a private equity impact fund managed by Acumen LatAm Impact Ventures (www.alive-ventures.com), which invests in companies that provide innovative solutions to tackle inequality in Colombia, Peru and Central America with a focus on agribusiness, education/access to formal jobs, and renewable energy.
- Impact America Fund II: $7.5 million equity investment to provide catalytic venture capital to early stage companies that are advancing economic agency for low and moderate income communities of color in the U.S.
- Prime Impact Fund: $5 million investment in Prime Impact Fund to address a critical capital gap for climate-relevant innovation by financing promising technology-based solutions with the potential to significantly reduce greenhouse gas emissions.
- Terra Silva: $20 million match with the David and Lucile Packard Foundation to launch Terra Silva, an impact investing initiative designed to respond to the challenges of global climate change by making investments focused on the conservation, restoration, and sustainable management of critical tropical forests worldwide.
- Zero Gap: $30 million match to expand and accelerate The Rockefeller Foundation’s Zero Gap initiative, which aims to tap into mainstream markets and investors, scaling up investments into promising new finance vehicles that help to close the SDG funding gap.
The balance of our $150 million catalytic capital allocation will provide matching investments to a select cohort of funds and other intermediaries that demonstrate the power of catalytic capital to bridge the financing gaps and unlock impact across a range of sectors and geographies . We expect to announce these additional investments in Q1 and Q2 of 2020.
Note: At this time, we are not accepting unsolicited investment or grant proposals. Following extensive outreach, we have invited a limited number of investment proposals for consideration. The Foundation has not determined whether or when it may invite additional requests.
What Is Catalytic Capital?
Catalytic capital is a subset of the full continuum of capital. Catalytic capital is investment capital that is patient, risk-tolerant, concessionary, and flexible in ways that differ from conventional investment. It is an essential tool to bridge capital gaps and achieve breadth and depth of impact, while complementing conventional investing. It can take the form of debt, equity, or guarantees.
When Should Investors Use Catalytic Capital?
Catalytic capital is well-suited for investors who want to support enterprises or funds that have high-impact potential but struggle to raise suitable financing because they are too early-stage or otherwise risky, expect to generate only modest returns, or require a longer investment time horizon. Catalytic capital can help enterprises and funds drive innovation, build a track record, leverage additional investment, signal impact potential, and safeguard mission.
Catalytic capital can also deliver market-level impact and unlock conventional investment in several ways. It can help prove out new and innovative products and business models; demonstrate that hard-to-reach geographies and populations most in need are, in fact, investable; establish a track record for new and diverse managers; and take sub-scale efforts with some degree of traction and help them to scale to a level where the economics are appropriate for conventional investment.
Catalytic capital is not appropriate for all impact investors and is not a panacea for all charitable, social, or environmental issues. However, for many investors’ portfolios, it can play a critical role in increasing breadth and depth of impact.
How is Catalytic Capital Used Today?
There is an immediate need for catalytic capital to fill financing gaps in impact investing. On the Convergence platform alone, there is $4 billion in emerging market blended finance structures seeking capital, with approximately $500 million in catalytic capital required.
More information about catalytic capital and how it is currently used is available in the Catalytic Capital: Unlocking More Investment and Impact report by consulting firm Tideline.
- Catalytic Capital Consortium Press Release ›
- One-Page Overview ›
- Frequently Asked Questions ›
- Case Examples ›
- Tideline Report: Catalytic Capital: Unlocking More Investment and Impact ›
Join the Community
We encourage investors, entrepreneurs, advisors, researchers and others to join us in expanding catalytic capital investment and learning.
Note: At this time, we are not accepting unsolicited investment or grant proposals. Following extensive outreach, we have invited a limited number of investment proposals for consideration this year. The Foundation has not determined whether or when it may invite additional requests.
We do encourage you to write to us to share information about your need for catalytic capital and how you seek to deploy it, including the impact you hope to achieve. We also would be pleased to learn about past experiences with catalytic capital, including how you’ve invested or benefited from catalytic capital and the lessons learned. Please also contact us in order to:
- Share your experiences with catalytic capital, including how you’ve invested or benefited from catalytic capital and lessons learned.
- Ask questions and propose research topics related to catalytic capital.
- Request information on how catalytic capital is being used today and where more is needed.