Back to Impact Investments

Impact Investments

Our Goal

Providing catalytic capital to mission-driven organizations working to address social and environmental challenges around the world

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—we can support promising opportunities that might otherwise be lost and create pathways for other forms of capital to contribute to these enterprises.

Our portfolio of more than 250 catalytic capital investments 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. Since the mid-1980s, our investments have furthered our grantmaking priorities and financed important work in affordable housing, economic development, and energy efficiency, among other sectors. Those investments have helped deliver valuable services to low-income communities, while building institutions that fuel ongoing progress. 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 lives. 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:

  • Make investments in enterprises and funds that pioneer new products or services, serve new people or places, attract new investors, build market infrastructure, and/or spur useful policy change;
  • Aim to have a lasting impact on the targeted beneficiaries (i.e. durability);
  • Often invest in intermediaries to multiply impact;
  • Collaborate and partner to reach scale; and
  • Complement investments with grants to unlock systems change.

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

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 Foundation strategies 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 impact.

More specifically, the outcomes toward which we strive 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 make catalytic investments that help bridge capital gaps and drive financing to organizations, enterprises, and initiatives helping to address some of the world’s most pressing problems. We also make grants that further advance those efforts: funding new products and platforms, supporting research and education, and fueling industry collaborations and demonstration projects. The goal is to build a more robust, more dynamic impact investing marketplace.

For more than three decades, the Foundation has used impact investing as one of many tools to advance our charitable, social, and environmental goals, making more than 250 catalytic capital investments and committing more than $500 million since 1983. These investments in debt, equity, deposits, and guarantees, provided to recipients in the U.S. and around the world, directly meet the capital needs of special-purpose funds, for-profit businesses and nonprofit organizations tackling critical environmental and social challenges.

We have two critical funding priorities that includes investments and grants: 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. In addition, we are deploying impact investments to advance our Climate Solutions Big Bet, with an initial focus on rooftop and off-grid solar in India.

Secondly, we seek to increase the knowledge, awareness, and use of catalytic capital, to inform and inspire those who are interested in rigorous, flexible investment strategies that drive even deeper, more sustainable impact for people and the planet.

As part of our commitment to impact-focused investments, the Foundation makes grants that support learning and market development around catalytic capital, innovation, knowledge-sharing, and collaboration. We fund approximately $43 million in grants each year that advance this objective, to support our goal of a more inclusive, efficient, and effective impact investment marketplace.


 

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, our 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 May 2019

Stay Informed
Sign up for periodic news updates and event invitations.
Connect with us on social media or view all of our social media content in one place.