Catalytic Capital Consortium

An investment, learning, and market development initiative bringing together leading impact investors to encourage greater impact and use of catalytic capital

Overview

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

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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 an essential component of achieving the Sustainable Development Goals (SDGs) and realizing the full potential of the impact investing field.

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 have dedicated up to $150 million to invest on a matching basis in approximately five funds or intermediaries that demonstrate a powerful use of catalytic capital across 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.

Key Resources

Catalytic Capital


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.

ToCome

 

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.

 

Investments


As part of the initiative, we are allocating up to $150 million in investments on a matching basis to approximately five funds or intermediaries that demonstrate a powerful use of catalytic capital across sectors and geographies. We expect to approve investments for $10 million to $30 million each in the form of debt, equity, or guarantees depending on the opportunity.

Our first investment is $30 million to expand and accelerate The Rockefeller Foundation’s Zero Gap initiative. The investment marks a unique impact investing collaboration between two foundations, where each will invest $30 million with the aim of catalyzing at least $1 billion in new capital to help meet the SDGs. These funds will be managed by The Rockefeller Foundation’s new impact investment management platform, 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. We have invited proposals for impact investment efforts that:

  • Demonstrate a powerful use of catalytic capital;
  • Span emerging and developed markets; and
  • Align with the SDGs.

With input from strategic partners, The Rockefeller Foundation and Omidyar Network, and after careful financial and legal review, our Board of Directors will consider specific investments by the end of 2019.

With our strategic partners we are collectively providing 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. 


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.


 

Strategic Partners


For more than three decades, we have used impact investing as one of many tools to advance our charitable, social, and environmental goals, committing more than $500 million since 1983.

We know there is still much to learn about catalytic capital, and we are pleased to collaborate with The Rockefeller Foundation and Omidyar Network, strategic partners who bring long-standing, complementary global experience and track records with impact investing, catalytic capital, and grantmaking. Prior to this collaboration, our three organizations collectively committed more than $900 million in catalytic capital as part of our broader impact investing.

We have seen firsthand how catalytic capital can help deliver valuable services to low-income communities and facilitate the flow of financing to promising opportunities that struggle to attract more conventional capital. Previous efforts include:

  • Our Window of Opportunity initiative deployed more than $200 million to spur the preservation and improvement of affordable rental housing across the U.S., including the New York City Housing Acquisition Fund.
  • Benefit Chicago is helping to build wealth, create jobs, and enhance job readiness in the greater Chicago area through our $100 million collaboration with Chicago Community Trust and Calvert Impact Capital.
  • Sixup is helping to bridge the financial gap preventing high-performing, low-income students from attending four-year colleges by identifying, underwriting, and incubating undervalued students – creating a new asset class branded as “future-prime.”
  • The Atlanta Environmental Impact Bond is the City of Atlanta’s first publicly-offered Environmental Impact Bond. Proceeds from the bond sale will fund approximately $13 million of green infrastructure projects in areas of the city devastated by flooding in recent years.
  • MicroBuild Fund, created by Habitat for Humanity and working in 30 countries, is the first housing-focused microfinance investment vehicle dedicated to helping low-income families improve their housing conditions and strengthen their tenure security.
  • SPARK Schools is a network of private primary schools in South African that combines well-trained teachers and world-class technology to deliver a learning experience tailored to each student’s needs – all at an affordable price.

Omidyar Network has also played a pivotal role in deepening the conversation about risk, return, and impact for the impact investing community at large. The firm’s Across the Returns Continuum report and Beyond Trade-Offs series paint a more nuanced picture of today’s impact investing field, helping more investors embrace capital from across the continuum, including catalytic capital.

Building on this experience, the Catalytic Capital Consortium will further demonstrate the power of catalytic capital and spark inquiry, exploration, and learning in the growing impact investing community.

Additional Resources

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We encourage investors, entrepreneurs, advisors, researchers and others to join us in expanding catalytic capital investment and learning. 

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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.
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