We want to break the echo chamber. Leading institutions are convinced that catalytic capital can accelerate impact in new ways, bringing together more actors from across the continuum of capital and driving more positive change for people and planet. But first, we need to make sure the most diverse voices – professionals interested in financing solutions, experts, SDGs-passionate individuals and opinionated observers alike – get the chance to voice their perspective. Please join our consultation by answering the questions below; you will join a community of 60+ international experts and practitioners committed to accelerate positive change through finance.
Catalytic capital is defined by the the Catalytic Capital Consortium (C3) as financing that “accepts disproportionate risk and/or concessionary return to generate positive impact and enable third-party investment that otherwise would not be possible.” We have asked 41 practitioners from 32 European organisations investing globally what catalytic capital means to them, why is it important, and what are the main barriers to its adoption. Below we outline main findings from this journey:
- Impact starts with catalytic capital: organisations that develop social and environmental solutions need time to generate data for proving their concept and refining their activities. This makes catalytic capital the starting point for any impact journey: impact ventures require bandwidth to understand their stakeholders, test their product and manage their impact.
But it goes beyond financing early-stage social entrepreneurs. Supporting new products, underdeveloped sectors, overlooked geographies or underserved profiles of entrepreneurs calls for a type of capital that is less attractive or not even possible to deploy for mainstream finance players: this is high-risk, long-term and flexible capital.
- Catalytic capital is additional: catalytic capital aims at achieving impact that would not have been achieved otherwise or, in other words, that is additional. Catalytic capital providers seek to enable third-party investment but, most importantly, to generate an additional impact through the capital deployed.
Additionality can be achieved through financial but also non-financial support. As such, catalytic capital is often provided alongside extensive non-financial support to further de-risk the supported solutions and to help them measure and manage their social impact.
- Who gets the returns? To date, there are many impact investors willing to collect the fruits, but too few planting the seeds. Catalytic capital providers are those impact investors that tend to accept that follow-on investors will benefit from their ability to de-risk investments and generate track records. We acknowledge the need for a continuum of capital to enable new markets to thrive, but the role of catalytic capital providers should be further valued and recognised: catalytic capital is not a private subsidy, but the essential investment to ensure a well-functioning ecosystem.
- Collaboration must increase in developing countries: although development finance institutions (DFIs) are crucial to develop and scale impactful solutions in the Global South, few of them have the possibility to deploy catalytic capital. Other catalytic capital providers must grow their strategic partnerships with DFIs and foster knowledge sharing and mutual learning.
Share your views.
To help us move forward we are asking experts and leaders in their field to
share their insights:
- What is your level of familiarity with catalytic capital?
- Do you deploy or receive catalytic capital?
- If yes, why?
- If not, what is preventing you from doing it?
- What needs do you see for more catalytic capital in the market where you operate?
- Please share the top single reason stopping you from deploying/receiving more catalytic capital.
Continue on the next page to share your views!