Initiative to boost low-profit businesses

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LONDON (Thomson Reuters Foundation) – A $150 million initiative launched on Tuesday aimed at helping socially conscious businesses that have few other options.

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The fund provides “catalytic capital”, intended to aid businesses working in areas such as affordable housing, electrifying rural areas and offering jobs for people with autism, which may have low profit potential or be overly risky.

The MacArthur Foundation, a Chicago-based private group, started the Catalytic Capital Consortium, and the Rockefeller Foundation and the Omidyar Network have joined as partners in the effort.

Impact investing, which promises social and environmental benefits as well as financial returns, has at least $228 billion in assets, according to data from the Global Impact Investing Network (GIIN), but leaves a hole.

“While impact investing is growing rapidly, much of the attention focuses on market-rate returns, leaving a serious gap in financing opportunities for many promising impact enterprises and funds that could help address critical social challenges,” Julia Stasch, president of the MacArthur Foundation, said in a statement.

Catalytic capital forms a bridge, Ms Stasch said.

“The consequence of this is you have impact driven enterprises that have a lot of promise that need capital that is more patient, more flexible, more risk tolerant and at times lower cost,” Debra Schwartz, managing director of impact investment at the MacArthur Foundation.

MacArthur’s first investment via the consortium is $30 million to the Rockefeller Foundation’s Zero Gap portfolio, which is a series of funds and other financial vehicles that aim to help move private capital to achieve the United Nations’ development goals.

The Rockefeller Foundation has matched the investment, pledging an additional $30 million for the portfolio.

To date, MacArthur, the Rockefeller Foundation and the Omidyar Network have collectively deployed more than $900 million in catalytic capital.

Social ventures to have benefited from this form investment include Spark Schools, a network of primary schools in South Africa and the Microbuild Fund, which helps people in India and other countries improve living conditions through small loans.

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