Catalytic Capital In Impact Funds

As impact investing continues to attract institutional attention, one enduring challenge is how to mobilize private capital toward strategies that involve higher perceived risk, longer time horizons, or complex impact objectives. Most often provided by development finance institutions (DFIs) and governmental sponsors, catalytic capital is a key tool to bridge this challenge.

By accepting differentiated risk or return features, catalytic investors seek to crowd in private capital while advancing development and policy objectives. While highly effective, these structures raise important considerations for fund sponsors and institutional investors.

What you need to know

• Catalytic capital refers to capital deployed to mobilize additional private investment toward strategies that involve higher perceived risk, longer time horizons, or complex impact objectives.