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Impact Investments

Our Goal

Providing flexible loans and other financial instruments to help nonprofit and social enterprises innovate, grow, and leverage capital to meet the needs of underserved people and communities.

Why We Support This Work

Impact investing has proven to be a powerful catalyst for global progress, and rising interest from mainstream investors is fueling significant market growth. Nonetheless, capital gaps abound and enterprises struggle to attract the financing they need to advance social and environmental goals. Worldwide, there is a multi-trillion global capital shortfall, according to the United Nations, and it is imperiling progress on poverty, health, climate change, inequality, and other concerns outlined in the UN’s Sustainable Development Goals.

Foundations like MacArthur are uniquely suited to help bridge these capital gaps because we are willing to accept a level of risk and return that mainstream investors often cannot. By providing catalytic capital—investments that are patient, flexible, risk-tolerant, and that can take a lower return when needed in order to deliver valuable services to low-income communities or facilitate the flow of financing—we can support promising opportunities that might otherwise be lost and create pathways for other forms of capital to contribute to these enterprises.

We have made more than 250 catalytic capital investments since the mid-1980s, furthering our grantmaking priorities and financing important work in affordable housing, economic development, and energy efficiency, among other sectors. Those investments have improved the outlook for low-income people and places, while building institutions that fuel ongoing progress. Our portfolio is profitable, though not profit-maximizing, earning a modest positive return. And the success of those transactions helps create impact that would otherwise not have occurred. All told, this experience demonstrates the viability of these impact investments and encourages the entry of new investors.

Our Approach

For more than three decades, we have maintained an impact investing practice to advance our social and environmental goals. Our investments include $517 million in below-market loans, equity, guarantees, and other instruments, with a strong focus on additionality—meaning the underlying activities would not take place “but for” our investment.

Leverage is also a priority, and we seek to use our capital in ways that achieve impact beyond what we could realize on our own. For example, we helped seed and grow the field of Community Development Financial Institutions (CDFIs), which invests billions of dollars annually to revitalize American communities. We anchored housing preservation initiatives that have attracted new capital to the sector and helped tens of thousands of families live better. And we have fueled innovative financing plans to retrofit aging multi-family properties with energy-efficient improvements, thereby testing opportunities for potential scaling and replication.

We have learned a great deal from that work, and it helps guide our approach today. Most notably, we:

  • Take early risk to foster innovation;
  • nvest in intermediaries to multiply impact;
  • Collaborate and partner to reach scale; and
  • Complement investments with grants to unlock systems change.

For more on historical investments, read Four Lessons from Four Decades of Impact Investing.

In addition to investments that support our program priorities, we focus on models and collaborations that bridge the capital gaps we see around the world—an approach that we refer to as “market-making for mission.” These market-making investments are not tied to any particular sector or geography; they are, instead, designed to increase the flow of purpose-driven capital to the organizations, enterprises, and institutions best positioned to spur change on a range of challenges. For example:

  • We invested $50 million of our assets to help create Benefit Chicago, a collaboration with the Chicago Community Trust and Calvert Impact Capital to mobilize $100 million for Chicago’s social sector.
  • We provided a $15 million liquidity facility to the Housing Partnership Equity Trust so that it could raise $100 million in capital to support affordable housing.

We also provide grants to support a more robust impact investing ecosystem. Grantmaking is intended to strengthen the field and help build the infrastructure necessary for growth and scale. View a sample of impact investments and grants.

Expected Outcomes

Our impact investments seek to improve the lives of people and the environment by supporting our big bets and enduring commitments and by focusing on the challenges outlined in the UN’s Sustainable Development Goals.

In addition to mobilizing and deploying catalytic capital, we are also working to build a strong evidence base that makes the impact investing field more effective. By widely sharing proof points and lessons learned, we can support innovation, encourage new investors, and scale up impact.

More specifically, the outcomes we strive toward include:

  • Attracting commercial and institutional capital, alongside providers of catalytic capital, to collectively contribute significant new financing for sustainable development;
  • Demonstrating the capacity of catalytic capital to efficiently finance high-impact and high-need opportunities that would otherwise be overlooked by the conventional market;
  • Developing clear evidence on how and when catalytic capital can have the greatest impact across different sectors and beneficiaries; and
  • Educating investors, policymakers, foundations, and others with a vested interest in this work about the value of catalytic capital so that there is broad recognition of its capacity to drive positive outcomes for people and the planet.

Conclusions in these critical areas will be informed by robust impact measurement and management practices.

Funding Priorities

We have two critical funding priorities: first and foremost, we make impact investments that advance the goals of our big bets and enduring commitments. For example, we continue our long support for our hometown of Chicago, investing in the local social sector, so nonprofits, enterprises, and intermediaries can take on challenges in the city’s communities.

Secondly, we are investing in initiatives that accelerate the flow of catalytic capital to high- impact opportunities for change. We expect to move forward with significant new “market-making” collaborations that advance this effort in 2018-19.


While we are not accepting unsolicited proposals at this time, we are always eager to hear new ideas and perspectives. Contact us ›


 

Representative Grants and Impact Investments ›

Measurement & Evaluation for Learning

Rigorous, consistent, and agile evaluation of our work is a critical tool for informing our decision-making, leading to more effective stewardship of the Foundation’s resources and better results. We develop customized evaluation designs for each of MacArthur’s programs based on the problem, opportunity, and approach to the work, as well as Foundation priorities around outcomes, impact, and learning.

To track the financial, organizational, and programmatic progress of impact investment recipients, the Foundation uses expert consultants and third-party resources, such as Aeris. In addition, recent and upcoming initiatives are aligned with industry norms, such as those proposed by the Impact Management Project.

Formal evaluation and assessment of the Foundation’s past impact investments include:

  • Comprehensive evaluation of Window of Opportunity (2016)
  • Assessment of the program-related investments (PRIs) awarded immediately after Hurricane Katrina (2012)
  • Early look at the impact of the NEXT Awards for Opportunity Finance (2011)
  • Strategic review of the CDFI field (2006)
  • Assessment of conservation-oriented PRIs made during the 1990s (2003)
  • Comprehensive, formal evaluation of the program’s first 15 years (2000)

 


Updated July 2018

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