Catalytic Capital | October 24, 2024

C3 doubles down to scale up deployments of catalytic capital

Dennis Price and Lynnley Browning
ImpactAlpha Editor

Dennis Price

Guest Author

Lynnley Browning

Below market, concessional and subsidized, make way for smart, strategic… and catalytic.

A year ago, the Catalytic Capital Consortium was ready to declare success and move on. At a side event to last year’s GIIN Impact Forum in Copenhagen, leaders of the effort to expand the use of first-loss reserves, low-interest loans and otherwise flexible capital signaled that the project was winding down.

Instead, C3, as it’s known, is opening a new chapter.

Amid growing demand, and increasing supply, of so-called catalytic capital, the consortium is redoubling its efforts to expand usage of the investment and financing tool.

Family offices Blue Haven Initiative, Builders Vision and Ceniarth, along with the Lemelson, Small and Walton Family foundations, are making new commitments to C3, founded by MacArthur Foundation, Omidyar Network and Rockefeller Foundation in 2019. MacArthur is re-upping its commitment, bringing C3’s total new funding to $4.3 million.

“We enthusiastically welcome this dynamic and diverse group of new partners as we collaborate to write the next chapter of the C3 initiative,” Debra Schwartz of MacArthur Foundation said in a statement shared exclusively with ImpactAlpha

Plugging gaps

Earlier C3 funding to accelerate the deployment of catalytic capital helped analyze gaps, build tools and showcase solutions. By one measure, “below market rate” investors, a proxy for catalytic investors, increased assets allocated to impact to $21.7 billion this year from $2.8 billion in 2019, a 51% compound annual growth rate, according to the Global Impact Investing Network’s “State of the Market” report.

With catalytic capital, investors accept higher risks or lower returns, more flexible terms, or longer repayment periods, in order to bridge capital gaps.

Such flexible, risk-taking capital has become essential for crowding commercial investors into blended finance deals, first-time and emerging fund managers, and sectors ripe for sustainable disruption, like food waste

More to do

The renewed support comes in part from conversations C3 had with investors and funders following last year’s Copenhagen meeting. To grow use of the strategy, community members said there was still more work to be done to share those lessons widely, connect investors with each other and to opportunities, and go niche, in sectors like climate.

The three-year expansion from C3 aims to build on “the field’s strong engagement and momentum,” noted Schwartz, to expand and connect an energized but fragmented community of practitioners, while boosting investments in high-impact projects that advance the UN Sustainable Development Goals.

Said Diane Isenberg of Ceniarth, which leads a catalytic capital dealmakers roundtable: “We are hopeful that the coming years will see significant new commitments from foundations and family offices to this impact-first form of investing.”


Disclosure: C3 supports ImpactAlpha’s coverage of catalytic capital.