The report begins by reviewing the various forms and purposes of catalytic capital, demonstrating substantial variety in the ways in which investors deploy it. This section also reveals that catalytic capital is not a binary feature of how impact investors work—rather than having just catalytic and non-catalytic impact funds in our sample, we find that many funds blend catalytic and non-catalytic capital.
The report then provides an overview of catalytic capital, demonstrating that it is associated with smaller fund size, greater use of debt, more focus on emerging economies, and less support from traditionally returns-focused limited partners such as insurance companies and pension funds. Following this overview, there is an exploration of financial performance goals among catalytic funds, showing that these funds often exhibit less emphasis on market-rate financial performance in ways that go beyond simple return metrics (e.g., internal rate of return). Next, an exploration of how catalytic impact funds differ from other impact investing funds, highlighting the challenges that catalytic fund managers report they experience in sourcing potential investments, attracting and securing investors, meeting financial targets, and exiting successfully. In the final section, the authors present findings on the impact of catalytic capital, highlighting the importance of additionality in how catalytic impact investors conceptualize their impact.