Viewpoint: How Philanthropy Can Help Impact Investing Reach Its Potential
Tuesday, August 6, 2019
By Michael Kubzansky, Rajiv J. Shah and Julia Stasch
Today’s impact-focused entrepreneurs are in overdrive, developing solutions to an ever-growing list of critical social challenges, including poverty, education, and climate change. Many of these pioneers rely on impact investments to fuel their work, but far too many enterprises and the funds that support them cannot access appropriate financing because they are too small, too risky, or profit-constrained.
Philanthropic organizations can play a critical role in bridging that gap with “catalytic capital.” Catalytic capital is neither a grant nor a profit-maximizing investment. Instead, it is an investment structured to be more patient, take on more risk, accept a lower return, or be flexible in other ways that differ from conventional capital.
Without sufficient catalytic capital, investors will be left on the sidelines, enterprises and funds will not receive the capital they need to succeed, and the global impact-investment market cannot realize its potential. This includes missing the opportunity to make significant progress on the Sustainable Development Goals, a collection of 17 urgent calls to action adopted by all United Nations member states to achieve peace and prosperity for people and the planet by 2030.
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