The Catalytic Capital Consortium (C3) is an investment, learning, and market development initiative to promote greater and more effective use of catalytic capital, in recognition of its essential role in realizing the full potential of the impact investing field, including in achieving the Sustainable Development Goals (SDGs).
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Our Goal
Working to increase the knowledge, awareness and use of catalytic capital, the aim of the C3 Grantmaking program is to demonstrate the power of catalytic capital as synergistic with other forms of investing across the full continuum of capital (including commercial rates of return) to safeguard the environment, support those most in need, and ultimately enable a more just, inclusive and resilient world.
Together, the C3 Strategic Partners—The Rockefeller Foundation, the Omidyar Network, and the MacArthur Foundation—are supporting field-building work to advance learning and market development related to catalytic capital, helping to answer critical questions about the scope of the need for catalytic capital, when and how catalytic capital can be most effective, and what tools and practices are needed. C3 Grantmaking is a project of the New Venture Fund, which will be making and managing all grants for this work.
Why We Support This Work
As we write this in mid-2020, countries, communities and leaders around the world face a three-part imperative: fighting the COVID-19 pandemic; rebuilding broken economies; and reversing deep disparities in race, class, gender and health. Millions of households, enterprises and funds struggle to access the capital they need to build a better future for themselves and the wider world. Women and people of color, as well as small and growing businesses in emerging markets, are vastly underserved by mainstream banks and investors. As a result, economic development and social progress fall short, and income and wealth disparities continue to widen and grow. The global COVID-19 pandemic has only served to heighten and highlight these inequities.
The Role of Catalytic Capital
For the required post-pandemic rebuilding and reinvention to succeed, we need to continue to adapt and innovate finance and investment. In particular, we need more investment capital that intentionally strives toward building a more equitable and sustainable world, and that is willing to bridge the capital gaps left by conventional investing. This kind of investment capital—which we call catalytic capital—is characterized by greater patience, risk tolerance, concessionality and flexibility than conventional investing.
The use of catalytic capital cuts across different asset classes and diverse types of providers including private and community foundations, high-net-worth individuals and family offices, impact investment wholesalers, corporations and corporate foundations, and governments and development finance institutions (DFIs).
As described in the Tideline report, catalytic capital can play a number of distinct roles including:
- Seeding – Catalytic capital can provide support to enterprises and intermediaries pioneering new models that have not yet demonstrated the commercial viability and track record required to attract conventional capital. By enabling these impact pioneers to test, refine and ultimately prove out their business models, catalytic capital helps to build the future pipeline of investable impact opportunities for conventional investors.
- Scaling – Catalytic capital can help impact enterprises and intermediaries to scale and expand their business into new situations, population segments and geographies. In many cases, such investments are also intentionally structured and deployed in ways that de-risk and mobilize additional investment from conventional investors.
- Sustaining – Catalytic capital can help to sustain impact enterprises and intermediaries that require subsidy on an ongoing basis, in order to maintain a focus on serving hard-to-reach beneficiaries or otherwise operate a business model that cannot achieve full commercial viability.
We acknowledge that the concept of catalytic capital is related to and overlaps with existing areas of work,[1] most notably the efforts of development finance institutions (DFIs) in the area of blended finance. As such, the C3 initiative intends for any work it supports to recognize existing knowledge and work in related areas with and clearly additionality and complementarity.[2]
It is important to note that our practice and understanding of catalytic capital is not static and continues to evolve. For instance, in 2020, we have seen capital with a higher risk appetite and flexibility being deployed to sustain impactful enterprises that would otherwise have been crushed by the economic fallout of the global pandemic.
[1] For more information and examples of how catalytic capital relates to other concepts – such as blended finance, please refer to the “Lexicon of Terms” on page 5 of the Tideline (2019) Catalytic Capital: Unlocking Investment and Impact (https://tideline.com/catalytic-capital-unlocking-more-investment-and-impact/)
[2] For example, while the field of blended finance has had a strong focus on the use of catalytic capital in achieving simultaneous mobilization of conventional capital (e.g., in a capital stack), it has not had as much focus on the sequential mobilization of conventional capital by catalytic capital, as models and markets ‘graduate’ over time.
Catalytic Capital Resources
There are a number of resources available to learn more about catalytic capital.
- The C3 Strategic Partners have compiled a set of introductory resources on catalytic capital and how it has been deployed effectively, which can be found here.
- In partnership with the FSG and Courageous Capital Advisors, the C3 Strategic Partners have also compiled a set of Frequently Asked Questions on Catalytic Capital. Read more here.
- Through C3’s Advancing Practice workstream, we have worked in partnership with Courageous Capital Advisors and FSG to develop a series of guidance notes focused on the seeding, scaling and sustaining roles of catalytic capital. The guidance notes are the product of C3 Learning Labs and reflect the insights of the seasoned catalytic capital investors who participated.
- Guidance Note 1—The Seeding Role
- Executive Summary for Guidance Note 1
- Guidance Note 2—The Scaling Role
- Executive Summary for Guidance Note 2
- Guidance Note 3—The Sustaining Role
- Executive Summary for Guidance Note 3
C3 Grantmaking Approach and Priorities
To make real progress toward a more just, equitable and resilient world, we need to unlock more catalytic capital and ensure that it is deployed more efficiently. The C3 Grantmaking program aims to equip the investor community with the knowledge and tools required to deploy greater and more effective investments of catalytic capital. This will involve efforts to build and advance knowledge about catalytic capital, as well as engage and work closely with the providers of this capital, with a specific focus on foundations, development finance institutions and family offices and foundations.
The C3 Strategic Partners have decided to fund work along the following streams:
1. Strengthening the Evidence Base
This workstream focuses on building knowledge about why and where catalytic capital has been needed, what it looks like, who has been involved, how it has been utilized, and what outcomes have been the result, drawing on current and historical experience from around the world. We believe that this evidence base will serve as an important foundation on which other workstreams will be built. This application window closed on March 31st, 2021, and awardees were announced on October 13th, 2021. If you would like to learn more about this grant process, please click here. To learn more about the funded projects, click here.
2. Advancing Practice
This area of work supports engagement and collective learning with leading catalytic capital providers to identify and share current best practices, as well as advancements in this form of investing. The key objective is to help practitioners solve technical or practical implementation challenges regarding the deployment of catalytic capital, by generating knowledge guides as well as facilitating convenings and other activities that are targeted to specific use cases and can inform and support effective deployment of catalytic capital in the wider field of impact investing. Note: There is no open RFP for this workstream.
3. Fostering Solutions and Infrastructure
To further spur the use of catalytic capital and help address key barriers and gaps that impede transactions, the C3 Grantmaking program has allocated funding for action-oriented pilots and projects. The goal is to aid both investors and capital seekers through practical resources and mechanisms that make catalytic capital transactions faster, more efficient, and more effective. Development of new public policies and incentives also could be explored. The C3 Grantmaking team will invite proposals for this workstream in a relatively “open-source” manner, encouraging prospective grantees to identify the problems and potential solutions they believe to be most important and opportune. These funded activities differ from but complement the other C3 approaches. To read more details on the grant guidelines, click here.
The first set of FSI awards were made in November 2022. Read more about them here. The final FSI grants were announced in March 2023. Read more about them here.
Alongside these workstreams, the C3 Grantmaking program will be working with a number of network partners to engage a range of investor audiences and amplify learnings and messages.
For specific enquiries and queries, please contact C3grantmaking@newventurefund.org.
The photo above is from SunColombia,a leading Colombian supplier of solar energy solutions for on-grid and off-grid clients, including projects in some of the most remote parts of Colombia. SunColombia is an investee of ALIVE Ventures, a private equity impact fund which invests in companies that tackle inequality in Colombia, Peru, and Central America, with a focus on agribusiness, education/access to formal jobs, and renewable energy. ALIVE Ventures is one of the MacArthur Foundation C3 Field Partnerships – learn more about this and other MacArthur C3 investments here.