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Why Catalytic Capital

Catalytic capital unlocks investment and global impact

What is Catalytic Capital?

Catalytic capital, as defined in the report Catalytic Capital in Australia, builds on the definition in the Tideline report Catalytic Capital: Unlocking More Investment and Impact. Catalytic capital is defined as debt, equity, guarantees and other investments that accept disproportionate risk and/or concessionary returns relative to conventional investment, in order to generate positive social and environmental impact and enable third-party investment that would not otherwise be possible. Capital that is considered 'catalytic' plays a critical role in unlocking impact investing more broadly.

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).

Two ways catalytic capital mobilises investment

How does catalytic capital drive progress?

Catalytic capital can play a number of distinct roles to seed, scale and sustain a wide range of impact funds, enterprises and initiatives. In the Australian context, catalytic capital has also been described as having ten special ingredients — including additionality, intentionality, flexibility, risk and/or concession, first-mover confidence, irreplaceability, unlocking 'bound energy', bringing others along, an end goal bigger than the capital itself, and a role in mobilisation or systems change.

Seeding

Catalytic capital can support 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, it helps build the future pipeline of investable impact opportunities.

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Scaling

Catalytic capital can help impact enterprises and intermediaries scale and expand into new situations, population segments, and geographies. In many cases, such investments are intentionally structured and deployed in ways that de-risk and mobilise additional investment from conventional investors.

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Sustaining

Catalytic capital can help 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.

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Key Resources

Catalytic Capital: An Essential Tool for Impact

MacArthur Foundation blog by Debra Schwartz on the vital role of catalytic capital.

ImpactAlpha: Catalytic Capital Beat

Curated hub for catalytic capital news covering geographies, sectors and investors.

Catalytic Capital: Unlocking More Investment and Impact

Foundational report from Tideline on catalytic capital and how investors use it to fill financing gaps.

FAQs on Catalytic Capital

C3's Frequently Asked Questions, developed with FSG and Courageous Capital Advisors, introduces investors to core concepts about catalytic capital.
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