Catalytic capital operates in different contexts and at different levels. Secondly, the lack of a set-in-stone definition reflects the variety of forms catalytic capital can take. Why a good sign?įirst, because debate is healthy. Not just the passion, but also the deep consideration and commitment that was evident in positions held, reflect the vibrant, engaged and live nature of this space. The rules are not set, outcomes have not been decreed and experimentation is still possible. However, we quickly learned that lacking a definition is actually a good sign. We were surprised by this wide divergence of views. We had mistakenly assumed a clear definition of catalytic capital would be quick to emerge amongst established players in a growing field. While we all shared an instinctive ‘feeling’ of what is catalytic, perspectives varied about what qualified. Depending on experience and focus, participants found themselves diverging on elements such as the role of grants, the need for unlocking follow-on finance or whether non-financial capital could also be catalytic capital. Catalytic capital still means many things to many people.Īs the first step towards a definition, the community we convened focused on identifying current deployment and awareness of catalytic capital – definition by example – and, crucially, discussed the barriers to unlocking more impact-minded capital. The time feels right for these conversations between experienced practitioners and debutants to unlock capital to solve today’s greatest challenges, from cost-of-living to climate and every crisis in between.Īnd yet… One thing was clear despite the wide level of expertise in our rooms and a desire to move past definitions to actions. The enthusiasm, interest and engagement of over 40 participating organisations was infectious – and is only growing. “That's the power of our particular brand of impact investing.After hosting 5 practitioner sessions to take the temperature of catalytic capital in Europe, we’ve reflected at length on definitions driven by EVPA’s member community. “We're essentially the shock absorber in the middle, the missing piece that we call the ‘but for’ money - meaning, but for our piece, they couldn't bring in the rest of the money,” she adds. Treasury Department Community Development Advisory Board and one of the founders of the Mission Investors Exchange. “We can give these institutions a cushion so that when an insurance company or a pension fund wants to invest, that investor can get a market rate of return and have enough risk mitigation,” says Schwartz, who is a past presidential appointee to the U.S. MacArthur invests in these institutions with a long-term horizon, in most cases planning an exit after 10 years. There are about 800 CDFIs in the nation, some of which focus on serving individuals (e.g., by providing payday lending, bank accounts, or affordable housing) and others that focus on small businesses (e.g., by bringing credit to businesses in low-income neighborhoods). Schwartz explains that, in the United States, there is an enormous need for community development financial institutions, or CDFIs. In fact, it’s not allowed under the IRS tax code definition of a Program-Related Investment.” “But if you do the kind of impact investing that I do, you can’t seek a market rate of return. With these investments, “there has to be some expectation of a financial return, whether it’s through a loan, equity investment or guarantee,” she says. MacArthur Foundation.Īt the MacArthur Foundation, Schwartz oversees a $300-million investment portfolio that supports economic development and affordable housing organizations in the United States. That experience set her down a path leading to where Schwartz is today, serving as managing director of impact investing at the John D. Schwartz found her answer in a class taught by Professor Donald Haider, who introduced her to the world of public finance and the ways in which industry and society could intersect for mutual benefit. “I was eager to learn how social-purpose organizations earned, raised and managed their money,” recalls Schwartz, who had worked in the nonprofit sector, mostly in human services, for several years prior to Kellogg. When Debra Schwartz ’88 came to Kellogg in the late 1980s, she had a keen interest in social enterprise - even though that term was somewhat foreign in the broader business community.
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