MacArthur Foundation on Tuesday launched the Catalytic Capital Consortium, dedicating $150 million to help address financing gaps in impact investing, particularly for funds and intermediaries that are not a fit for conventional investment.
The Foundation supports creative people, effective institutions, and influential networks building a more just, verdant, and peaceful world, and is also placing a few big bets that truly significant progress is possible on some of the world’s most pressing social challenges, including over-incarceration, global climate change, nuclear risk, and significantly increasing financial capital for the social sector.
In addition to the MacArthur Fellows Program, the Foundation continues its historic commitments to the role of journalism in a responsible and responsive democracy, as well as the strength and vitality of their headquarters city, Chicago.
The group is one of America’s largest independent foundations. Organisations supported by the Foundation work in about 40 countries. In addition to Chicago, MacArthur has offices in India, Mexico, and Nigeria.
It is being joined in this latest effort by leading impact investors The Rockefeller Foundation and Omidyar Network, who will add their expertise and financial resources to the Catalytic Capital Consortium.
MacArthur’s first investment is $30 million to expand and accelerate The Rockefeller Foundation’s Zero Gap innovative finance portfolio, matched by $30 million from The Rockefeller Foundation.
Catalytic capital is investment capital that is patient, risk-tolerant, concessionary, and flexible in ways that differ from conventional investment. According to Catalytic Capital: Unlocking More Investment and Impact, a report released today by the consulting firm Tideline, catalytic capital is an essential component to achieving the United Nations’ Sustainable Development Goals (SDGs).
As the SDGs face an annual $5 trillion to $7 trillion financing gap, catalytic capital can help meet the demand for more capital across the risk-return spectrum, complement and pave the way for conventional investment, and mobilise additional capital through a range of blended finance solutions.
The Catalytic Capital Consortium will increase awareness, understanding, and use of catalytic capital as an investment tool, ultimately helping more enterprises secure the financial support they need to grow and scale social and environmental solutions that could improve millions of lives.
Catalytic capital is investment capital that is patient, risk-tolerant, concessionary, and flexible in ways that differ from conventional investment.
“Catalytic capital is needed for impact investing to realize its full potential,” said MacArthur President Julia Stasch, who announced the Consortium at the Global Impact Investing Network Investors’ Council Annual Meeting, alongside the leaders of The Rockefeller Foundation and Omidyar Network.
“While impact investing is growing rapidly, much of the attention focuses on market-rate returns, leaving a serious gap in financing opportunities for many promising impact enterprises and funds that could help address critical social challenges. The Catalytic Capital Consortium will help more investors appreciate the importance of this type of capital in yielding deeper, more sustainable impact for people and the planet.”
Since it was launched in 2015, The Rockefeller Foundation’s Zero Gap grant portfolio has grown to nearly 50 unique financial structures across 28 countries. MacArthur’s matching investment in Zero Gap builds on this work, marking 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, Rockefeller Foundation Impact Investment Management, 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 math is simple: The cost of solving the world’s most critical problems runs into the trillions of dollars. Currently, more than $200 trillion in private capital is invested in global financial markets. Together, we must find innovative and catalytic solutions to mobilize private capital to close this widening gap between those with hope and prosperity, and those without,” said Dr. Rajiv Shah, president of The Rockefeller Foundation.
“Closing this financing gap is our urgent task, and we’re deeply humbled to manage this significant investment by The MacArthur Foundation toward that essential end.”
The balance of MacArthur’s $150-million catalytic capital allocation will provide matching investments to a select cohort of funds and other intermediaries that demonstrate a powerful use of catalytic capital with the potential for significant impact addressing the SDGs.
To date, MacArthur has invited proposals from impact investment efforts across emerging and developed markets to apply for its matching capital commitments. These funds and other intermediaries address a wide range of issues aligned with the SDGs, such as forest conservation, sustainable agriculture, inclusive entrepreneurship, education, reproductive health, energy access, and refugee finance. MacArthur will announce additional specific investments later this year.
“This initiative has the potential to help investors better target catalytic capital to where it can have the greatest impact…”
Additionally, MacArthur, The Rockefeller Foundation, and Omidyar Network will dedicate $10 million over three years to grants that fuel learning and market development, helping illuminate when and how catalytic capital can be most effective and what additional tools and practices are needed for impact investors.
“The pressing challenges we face today, particularly rising inequality, require us to reimagine capitalism and shift how we think about the role of capital in our economy and society,” said Mike Kubzansky, managing partner at Omidyar Network.
“Investors need a greater understanding of the range of capital across the returns continuum. This initiative has the potential to help investors better target catalytic capital to where it can have the greatest impact—ultimately helping to pioneer new innovations, drive sector-level change, and unlock larger sums of investment to build more equitable economies.”
Prior to this collaboration, MacArthur, The Rockefeller Foundation, and Omidyar Network have collectively deployed more than $900 million in catalytic capital as part of their broader impact investing.
Building on this experience, the Catalytic Capital Consortium will demonstrate the power of catalytic capital and spark inquiry, exploration, and learning in the growing impact investing community.