Living Cities Launches New $31 Million Blended Catalyst Fund for Social Impact Investment in US Cities
Thursday, March 31, 2016
Living Cities today launched the Blended Catalyst Fund, a $31 million impact investing debt fund that will test innovative approaches to solving urban problems. The Blended Catalyst Fund combines philanthropic and commercial debt under the premise that both types of capital are needed to support initiatives that achieve better results for low-income people in US cities. The Fund currently includes ten philanthropic and commercial investors that are committed to increasing the flow of available capital to meet growing demand for social services across the country.
“The Blended Catalyst Fund highlights an important and exciting milestone for Living Cities, our members and our partners, who have come together to collaborate on better ways to invest in low-income communities,” said Ben Hecht, President and CEO of Living Cities. “Capital innovation has always been a key component of our work, underpinned by the knowledge that we cannot ‘grant’ our way out of poverty. We need to find and experiment with new ways to pool and deploy capital to address the most pressing problems facing society today.”
Unlike a traditional grantmaking fund, the Blended Catalyst Fund invests repayable capital in urban initiatives that deliver measurable impact. The Fund will provide term loans, lines of credit and equity investments at below-market rates to organizations, both for-profit and non-profit, and local governments that are focused on economic development, income inequality, small business development, homelessness and similar social issues. Current fund investors are Annie E. Casey Foundation, Deutsche Bank, Ford Foundation, The Kresge Foundation, John D. and Catherine T. MacArthur Foundation, MetLife Inc., Prudential Financial, Robert Wood Johnson Foundation, The San Francisco Foundation and Surdna Foundation.
“The genesis of the Blended Catalyst Fund came from our learnings about the need for more efficient ways to attract, blend and deploy capital,” said Eileen Neely, Director of Capital Innovation at Living Cities. “We set up the Blended Catalyst Fund to advance our goals beyond the dollars that grants can supply, because repayable capital unlocks significantly more resources available to accelerate, scale or replicate investment efforts.”
Current and anticipated loans or investments include:
Denver Pay for Success: The Blended Catalyst Fund made a $500,000 loan to Denver PFS LLC, which provides funding for permanent housing and supportive services to chronically homeless individuals across Denver. For more information, see press release.
Detroit New Economy Initiative Fund: The Blended Catalyst Fund will make a $1 million loan to the New Economy Initiative Fund, a Community Foundation of Southeast Michigan program, which will make loans to entrepreneurs and small businesses in and around Detroit who are currently shutout from the mainstream market.
Impact Ventures III: The Blended Catalyst Fund made a $2 million equity investment in City Light’s Impact Ventures III fund, which invests in mission-based entrepreneurs focused on education, safety and the environment.
Regional Equitable Development Initiative Fund: The Blended Catalyst Fund plans to make a $3.5 million loan to the Regional Equitable Development Initiative Fund which will provide early stage financing to create quality, affordable housing near transit to connect low-income residents with jobs, schools and services in the greater Seattle region.
Urban Innovation Fund: The Blended Catalyst Fund expects to make a $500,000 equity investment in the Urban Innovation Fund, which provides capital and guidance to early-stage social entrepreneurs solving critical urban challenges.
Through its loans and equity investments to organizations, the Blended Catalyst Fund provides investors with a platform to innovate, collaborate and share learnings to achieve the greatest impact for low-income communities. By pooling their resources, investors unlock capital to test innovative solutions to urban challenges.
“As a 25-year member of Living Cities, we believe that the private sector has an important role to play in finding solutions to cities’ greatest problems,” said Dennis White, President & CEO of MetLife Foundation. “By investing in the Blended Catalyst Fund, we can explore new and better approaches to direct commercial capital to low-income communities.”
“The issues facing cities today have many touch points and cannot be solved by one sector or organization alone. The Blended Catalyst Fund enables us to collaborate and share learnings with other investors to find sustainable solutions,” said Phillip Henderson, President, Surdna Foundation.
By investing in the Blended Catalyst Fund, institutions amplify their impact and share the risk of testing innovative financial structures.
“Our grant helps protect Fund investors from financial risk and encourages other institutions to join the Blended Catalyst Fund. Collectively, we can multiply our impact, scale successful models and drive more capital to improve health where there is greatest need,” said Donald Schwarz, Vice President of Robert Wood Johnson Foundation, which provided a $2 million grant for loss protection for the Fund’s investors.
Living Cities has prioritized impact investing as a model for social change in America for 25 years, and has made $44 million in impact investments to support low-income communities across the country since 2008. Living Cities invested in the nation’s largest Pay for Success (PFS) deal and continues to explore new ways to direct capital toward social impact needs. In October 2015, Living Cities and Third Sector Capital Partners, Inc. announced the Pay for Success Construction Loan, a first-of-its kind loan product that covers the upfront costs of constructing PFS projects. Since 2011, ImpactAssets 50 has recognized Living Cities as an outstanding impact investing fund manager.
Investor commitments to the Blended Catalyst Fund are expected to grow to $40 million by fund close.