While many financial services institutions have entered the impact investing sector, significant capital gaps remain in addressing opportunities that deliver impact that are new and unproven, sub-scale or entail more challenging risk-return profiles. This is where catalytic capital comes in. Catalytic capital is defined as capital that “accepts disproportionate risk and/or concessionary return to generate positive impact and enable third-party investments that otherwise would not be possible.”
This report explores how catalytic capital be moved more quickly and effectively to best mobilize other capital, and how it can be utilized to create impact that could otherwise not be achieved. As the first of a series of three publications, this edition specifically provides guidance to catalytic investors in a seeding role on how to tackle key challenges and ways to advance the practice.
Top Takeaways: (1) Catalytic capital is needed to ensure that impact investing pushes farther, harder, and faster to reach the full range of solutions that can build a more equitable and sustainable future; (2) Innovative strategies are pushing into new areas because they represent an opportunity to enable impact that otherwise would not be achieved; (3) Catalytic capital often moves too slowly and fails to seize opportunities with the urgency and decisiveness needed to address the pressing issues of our day.