I’ve spent more than a decade working in impact investing, first as a researcher of blended finance and private-sector approaches to energy access, then as a provider of catalytic capital to the energy access sector at Facebook/Meta, and now as a founder of Enduring Planet, a debt platform that leverages catalytic capital to offer non-dilutive financing to climate entrepreneurs.
I’ve seen the term “catalytic capital” thrown around until it’s nearly lost its meaning, and I think it’s time to anchor it back to reality. True catalytic capital isn’t just about below-market returns; it’s about behavior. It’s about how you show up, how you operate and how you treat the people actually doing the work.
So, to kick off 2026, I decided to jot down some notes on what I think makes for “good” catalytic capital, in part inspired by Kevin Starr’s excellent piece, “There is No Such Thing as Impact Investing.” I hope folks who manage flexible money give this a read and maybe, just maybe, adjust their operating practices in the new year.
But first, what is catalytic capital?
Before we dive deeper, I’d like to get clear about what I mean by catalytic capital.
Tideline has one of my favorite definitions of catalytic capital: “investment capital (debt, equity, guarantees, grants, and other investments) that accepts disproportionate risk and/or concessionary returns relative to a conventional investment in order to generate positive impact and enable third-party investment that otherwise would not be possible.”
In short, it is money that does the hard work others won’t, and it unlocks additional private investment into market-based solutions to critical societal problems.
While many will also refer to catalytic capital interchangeably with impact investing or traditional philanthropy, that is not what I’m talking about here.
Who is this piece for?
This piece is for anyone actively managing catalytic capital — whether as an individual or as part of a team at a foundation, family office or non-profit — or anyone who is considering building a catalytic capital program.
I want to acknowledge the reality that some organizational challenges, such as institutional bureaucracy, rigid risk protection mandates and simple human inertia, are difficult to reshape. These systems are not malicious; they are often the product of real (or perceived) fiduciary duty and institutional history. Yet, we must all remember the higher purpose of catalytic capital.
Institutional inertia is not a license for complacency.
Best practices for deploying catalytic capital
Below I share some catalytic capital best practices. This piece is not meant to be a guide for how all impact investing or philanthropy is meant to be done, although some of the best practices are easily transferable.
1. The recipient is the customer
Shift your mindset: Your “customer” is not just your board, your investment committee or your donors, but the startup or fund you’re supporting. Build your operating process with this dynamic in mind. This shift may mean minimizing legal headaches for them, streamlining reporting and respecting the founder’s or fund manager’s time.
To be clear, this doesn’t mean you should deprioritize or ignore your board or donors. Work with them to build a clear decision framework around what you can fund, how you can do it, what you need to measure and when capital should be deployed. After that, work within the box to build the most recipient-friendly process you can.
For example, as ImpactAssets and Toniic have both highlighted in their best-practices guides, the “burden” of impact measurement too often falls disproportionately on the entrepreneur, distracting them from the actual work.
If your reporting requirements are heavier than your check size, you aren’t catalyzing impact, you’re taxing it.
2. Speed is a feature, not a bug
Beyond the capital itself, the most valuable thing you can give a founder is time. If your process drags on for months, you’re unintentionally suffocating the innovation you claim to support. Build a process that moves at the speed of business while retaining the spirit and flexibility of philanthropy.
This change might mean saying “no” quickly so founders can move on, but it also means saying “yes” fast enough to matter.
3. Take real risk
Catalytic investors talk a big game about risk, yet they often demand similar downside protections (and sometimes even returns) as their commercial counterparts. This is antithetical to being a catalytic investor.
To be catalytic, you must accept disproportionate risk for your “return.” This is the “gap” that folks like the Schmidt Family Foundation and others successfully target.
4. Stop asking, “Who else?”
If you need to know who else is investing before you commit, you aren’t catalytic. True catalytic capital, as championed by groups like Prime Coalition, is about “financial additionality,” i.e. going where others won’t. Make your decisions based on your own data and independent conviction.
If you’re waiting for a “lead,” you’re not catalytic. You’re part of the bottleneck.
5. Come prepared to invest
The best catalytic investors seek to maximize a founder’s time by coming to the table with a pre-existing grasp of the market, the gaps that catalytic capital can fill and their specific role in addressing those gaps.
This non-extractive and ethical approach recognizes that a founder’s job is to build their company, not to build your investment thesis for you. When you force a founder to spend many precious hours educating you on the basics of their sector, you are extracting value, not adding it.
Maximize the impact of your engagement by coming prepared to invest, not just to learn.
This doesn’t mean that you can’t survey the market or ask founders or fund managers questions. But it does mean that you should be profoundly mindful of the burden you place on them, and where possible, compensate them for their time and effort.
6. Distinguish between required and desired
Be ruthless about what you actually need versus what would be nice to have. Do you need that board seat? Do you need that specific warrant coverage? Does your first-loss investment need to generate a higher return than the senior tranche?
Every “nice-to-have” term you enforce adds friction and cost to your client and ultimately reduces your catalytic impact.
7. Don’t get creative
Complexity kills deals. Don’t invent a novel revenue-share waterfall just to prove you’re innovative. Standard instruments exist for a reason; they work. Lawyers understand them, and critically, private investors do too.
Only design a bespoke structure if the problem truly demands it. Otherwise, keep it simple so everyone can focus on maximizing impact.
8. Enable, don’t distort
Your capital should bridge a gap to commercial viability, not create a permanent dependency. Be hyper-aware of market distortion.
The goal is to prove a model so the market can eventually take over, not to subsidize a business that will never stand on its own.
This approach means identifying gaps in the market where perceived risk and real risk are truly misaligned. For example: What is the real reason why other investors are not participating? Is it because the opportunity is not investable at any price? Or is it because their “risk-adjusted return” doesn’t work with the parameters of the deal? If the former, this is not a good opportunity for catalytic capital, but it might be a great bet for traditional philanthropy. If the latter, you’re probably barking up the right tree.
9. Obsess over communication
If you don’t have an answer, say that. If you’re delayed, own it. Proactive communication builds trust even when the news is bad.
Ghosting a founder or leaving them in limbo is unprofessional and harmful to your mission as a catalytic investor. It’s an extractive practice that forces entrepreneurs to waste precious time chasing updates when they could be solving the very problems you care about. Be open, be direct, and encourage them to keep you honest.
One of our internal mantras at Enduring Planet is this: If a customer is asking us for an update, we’ve failed. We have built processes, systems and templates to ensure all prospective borrowers know where they are in the process at any given time, what steps remain and when they should expect funding. Any delays or changes are communicated immediately to ensure alignment.
The trillion-dollar opportunity in climate
While catalytic capital is relevant in any impact sector, I believe climate change presents a unique opportunity for catalytic investors to move and shape markets. Adopting these catalytic capital best practices isn’t just about being “founder-friendly” or winning impact awards; it is an existential necessity given the risk that our society faces today.
The math on climate change is unforgiving, and the gap between where we are and where we need to be is massive. To reach the estimated $5 trillion to $10 trillion in annual investment required to achieve global climate targets, we cannot wait for private markets to get there on their own.
So, for 2026, let’s make a pact to do better. If we can strip away the ego, the bureaucracy and the hesitation, we won’t just be writing checks, we will be building the on-ramp for the largest economic transition in history, all while solving the greatest challenge of our time.
Let’s get to work.
Dimitry Gershenson is the CEO of Enduring Planet.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
