Catalytic capital and blended finance

Explore

Research queue

Uncategorized research

Updates to overview

Add visuals, like this example:

https://www.crossboundary.com/energy-access/⁠

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https://www.weforum.org/reports/blended-finance-toolkit⁠

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http://www3.weforum.org/docs/WEF_Blended_Finance_Insights_Investments_Vehicles_Facilities_report_2016.pdf⁠

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http://www3.weforum.org/docs/WEF_Blended_Finance_A_Primer_Development_Finance_Philanthropic_Funders.pdf⁠

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https://ssir.org/articles/entry/attracting_greater_philanthropic_funding_the_private_equity_model#⁠

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file:///Users/zakweston/Desktop/The_State_of_Blended_Finance_2020.pdf

Reports from

https://gsgii.org/⁠

Catalysing an Impact Investment Ecosystem: A Policymaker’s Toolkit Policy & Advocacy

Enabling ventures to leverage technology for impact

Demand of Capital It analyses the different enabling elements across the lifecycle of impact-tech, and focuses on recommendations to improve the global tech-for-good ecosystem Investing for a better world

Supply of Capital It focuses on recommendations to strengthen the financial services value chain to meet the sustainable development goals

Widening & Deepening the Market for Impact Market Builders It outlines the why and what of impact investing and presents a theory of change for widening participation and deepening practice with practical guidance on actors and levers

Exemplary overview of infrastructure finance for social development

https://www.crossboundary.com/wp-content/uploads/2020/12/Project-Financing-Mini-Grids-Online_Pages.pdftr⁠

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Financial Times IFC awards

Social impact bonds

https://toplink.weforum.org/ project/blended-finance-network

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https://bigsocietycapital.com/how-we-work/making-investments/support/building-blocks⁠

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https://www.goodfinance.org.uk/tools-and-resources

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https://www.goodfinance.org.uk⁠

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https://evpa.eu.com⁠

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https://www.edf.org/ecosystems/how-catalytic-capital-can-support-sustainable-agriculture⁠

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https://www.acf.org.uk/networksandevents/siig⁠

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https://bigsocietycapital.com/how-we-work/creating-new-ideas/how-we-co-develop-ideas⁠

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Coalition for Green Capital

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https://www.edf.org/ecosystems/how-catalytic-capital-can-support-sustainable-agriculture⁠

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Systemiq

blended finance report⁠

report B⁠

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Review Catalytic capital asana project, including funds to start, investor donors, etc.

Government backed sustainability bonds

Alternative investment management firms

Maybe the hybrid Dana Farber donate/invest fund

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Guaranteed offtakes, AMC’s. minimums⁠

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https://www.alignedclimatecapital.com⁠

/ (Not only is this a fascinating case study, but alternative protein should be their fifth pillar!

Working capital, supply chain finance, reverse factoring, revolving credit facility

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https://www.yieldstreet.com/resources/article/supply-chain-financing⁠

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High:

http://www3.weforum.org/docs/WEF_Blended_Finance_A_Primer_Development_Finance_Philanthropic_Funders.pdf⁠

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Low:

https://developmentfinance.un.org/node/2463⁠

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Research using the Convergence resource library

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https://www.convergence.finance/news-and-events/news/2ODjLTknchuuvzPWa4rty4/view⁠

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https://www.convergence.finance/resource/3qke8x7gEFCsmKRXi2JD8o/view⁠

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https://www.crossboundary.com/wp-content/uploads/2020/12/Project-Financing-Mini-Grids-Online_Pages.pdf⁠

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https://www.convergence.finance/resource/1gR7Z7AlksKUIQ6wgYuSkm/view⁠

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Convergence has some upcoming workshops and events, submitted membership request

Need membership to access this resource:

https://www.convergence.finance/resource/9ncqGGGACPGY9QonSWGSm/view⁠

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Work with development finance groups

Pull categories from BioFungible overview, table in Evernote

Designing a blended transaction requires two distinct skill sets, one being financial expertise to develop the right financial structure with appropriate risk-return profiles for funders and investors, and the other, sector-specific expertise to determine interventions that can yield the desired development impact.

develop a new Green FIDC⁠

(Portuguese for Green Receivables Fund) - an organization with sector-specific knowledge needed to partner up with an institution bringing in the financial expertise.

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https://www.convergence.finance/news-and-events/news/4uybIuW7U5mhONPIuvECEs/view⁠

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Good Food Labs

This could be a model for GFRI, funded by donors and contracts

Alt protein finance labs

Alt Protein Labs

Protein Lab

GFI Labs

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https://www.crossboundary.com/labs/our-prototypes/⁠

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https://www.crossboundary.com/labs/our-research/⁠

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Identifying solutions and testing them, RCT, very EA friendly

We conduct studies of promising technical, policy, commercial model, financing, marketing, and other innovations to identify promising scaleable solutions to large-scale problems facing the alternative protein industry

Good explanations

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https://www.finance-in-motion.com/what-we-do⁠

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Fund design

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https://rsfsocialfinance.org/⁠

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https://www.crossboundary.com/energy-access/open-source/⁠

(they are sharing their paperwork February 15 2021)

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https://www.innpact.com/⁠

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https://www.ecobusiness.fund/en/the-development-facilities⁠

, "Info for Investors" section

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https://www.ecobusiness.fund/fileadmin/user_upload/Publications/english/ecobusiness_DF_Pitchbook_LAC_subfund_final_10_2019.pdf⁠

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https://macsonline.de/ivs/energy-finance/service/⁠

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Example:

https://www.sunfunder.com/what-we-do⁠

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https://www.bridgesfundmanagement.com/⁠

(They work to build this field, would make an excellent interview)

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https://www.bridgesfundmanagement.com/wp-content/uploads/2017/08/Bridges-Spectrum-of-Capital-screen.pdf⁠

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How we might participate in social impact bonds, development impact bonds

Eventually we could launch a fund manager, our own funds, funds of funds,

Maybe we launch the fund of funds for the catalytic part of the the capital

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https://www.bridgesfundmanagement.com/outcomes-contracts/⁠

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https://www.bridgesfundmanagement.com/long-term-capital/⁠

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Bridges Fund MGMT has already invested in vegetarian company

Launching business/industrial parks that are targeted to alt proteins, like at former malls (Bridges Fund Management has done this)

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https://www.bridgesfundmanagement.com/portfolio/flexspace/⁠

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https://flexspace.co.uk/unit-types/workshop/⁠

in key areas

This is the physical instantiation of the top ideas

Research institute system

Input characterization

BioFungible

Catalytic capital

Manufacturing

Cluster

How do non-profits generally participate and benefit? Informs GFI role

Potential fund managers: UBS (any group that has lots of funds), OPP, Coller, Unovis, Blue Horizon, Siddhi, Align Impact, Big Society Capital, Arabella, impact investment wholesalers

Other sources:

https://www.convergence.finance/blended-finance#investors-overall⁠

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Other sources:

https://www.impactassets.org/⁠

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Go through their full list for ideas and research

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https://www.impactassets.org/⁠

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https://bigsocietycapital.com/portfolio/⁠

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Rabobank

ResponsAbility

AXA, Ardian

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https://gsgii.org/wp-content/uploads/2018/10/GSG-Paper-2018-Wholesalers.pdf⁠

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Can be public/private partnerships

Calvert Impact Capital

Ceniarth

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https://www.thinknpc.org/about-npc/⁠

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https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view⁠

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GFI Dev team

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https://www.convergence.finance/design-funding⁠

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Gates, MacArthur, Rockefeller, Ceniarth, etc.

Mention design funding grants from Rockefeller, Convergence

To arrange for a bespoke knowledge exchange for your organization, email Aakif Merchant at

aakif.merchant@convergence.finance⁠

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https://www.convergence.finance/design-funding/grant-portfolio⁠

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https://www.convergence.finance/design-funding/grant-portfolio/34Ra3ds5ZKi9TQDTKz26T8/view⁠

share with GFI Brazil as an interesting case study

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http://blue-finance.org/⁠

Share with Jen, also

https://www.convergence.finance/design-funding/grant-portfolio/1p0gkVK0kW7IBAlHNniZ4J/view⁠

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https://bluemarktideline.com/clients/⁠

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This depends on type of instrument: loan, equity, grant, guarantee

This idea has some strong affinity with guaranteed offtakes, AMC's/guaranteed minimums, shared repurposable facilities/equipment,

Ask GIIN report author or research person

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https://www.unpri.org/⁠

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https://www.pgim.com/real-estate/impact-investing⁠

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https://cdn.pficdn.com/cms/pgim-real-estate/sites/default/files/2020-11/PAI%20One-Page%20Agribusiness_Generic%202020.pdf⁠

- slaughterhouse loans

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https://northskycapital.com/⁠

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https://leapfroginvest.com/⁠

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https://www.incofin.com/⁠

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https://www.omnivore.vc/⁠

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http://ceniarthllc.com/strategies/impact-first-capital-preservation/⁠

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http://ceniarthllc.com/strategies/responsible-asset-management/⁠

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Blue Orchard

Sustainable Jobs Fund/ SJF Ventures

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http://www.olympuscap.com/en/industry-expertise/environmental-and-clean-energy.html⁠

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https://www.baincapitaldoubleimpact.com/⁠

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https://generatecapital.com/⁠

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https://gssgsolar.com/impact/⁠

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https://www.generationim.com/⁠

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Search for project finance facility

We could spin out a broker/consultant/advisory firm that helps connect alt protein firms with the investment and finance products they need

We could literally get design grants to create Solutions!

In 2015, Blue Forest received an early-stage design grant from the Rockefeller Foundation’s newly launched Zero Gap Portfolio. Here, the Rockefeller Foundation was specifically looking for projects that were i) scalable and replicable across a broader market, ii) commercially viable, and iii) creative in their structuring approach. Rockefeller’s funding offered crucial support to Blue Forest as they continued to build out the model and identify investors.

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https://bigsocietycapital.com/how-we-work/social-enterprises-and-charities/⁠

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Start an impact investment wholesaler for the alternative protein sector

The India Impact Fund of Funds plans to lend US$1 billion to debt funds that invest in social enterprises. The Fund seeks to fill an apparent gap in medium- to long-term unsecured debt. It will target a 9% return over its ten-year life. The Fund aims to raise US$600 million from finance-first investors (those that emphasize return) and US$400 million from impact-first investors (those that emphasize social goals and do not necessarily seek a commercial return). The Fund will approach financial institutions and members of the Indian diaspora as finance-first investors. It will approach foundations and development finance institutions as impact-first investors. It will ask the impact-first investors to take a first-loss position.

Tasks

12.23: Map out this project and its workstreams, publications I need to write or get others to write, the topical cluster, action items

Promote this to the alt protein community

Promote alt proteins as an investment asset class to impact, catalytic, and blended finance community

Create own project in Asana

Parse subtask

Conduct research below

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https://www.morningbrew.com/daily/stories/2020/09/23/finance-beginners-best-articles-expert-resources⁠

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https://www.alignimpact.com/⁠

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12.24: After CE-SciTech meeting: Evaluate splitting out this section into its own document

Pitch this idea to Blue Horizon

Could launch this with Cass, get her help with researching this area

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https://missioninvestors.org/resources/catalytic-capital-essential-foundation-tool⁠

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New Energy Risk (NER) helps insure technical risk for breakthrough technologies to optimize cost of capital and accelerate time to market. We should talk to them

12.25: Subtask, write 2-pager/proposal on catalytic capital for January PhaseGate

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http://www.oecd.org/dac/financing-sustainable-development/development-finance-topics/blended-finance.htm⁠

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https://www.adb.org/documents/dfi-blended-concessional-finance-report-2018⁠

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Jan: This should be presented to GWS, OPP, FAIRR,

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http://www.un.org/esa/ffd/ffd3/index.html⁠

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http://sdiponline.org/⁠

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Jan: Work with MacArthur, Ford, Gates, Rockefeller, Omidyar, and others to show how alt proteins are an opportunity area for catalytic capital. Omidyar Network, Blue Haven Initiative and Candide Group, both family offices, have made substantial impact investments and done significant “catalytic” work. It can also be a corporation—Prudential

Join MacArthur's Catalytic Capital Consortium, Rockefeller Zero Gap initiative

As part of the initiative, MacArthur is dedicating up to $150 million in investments on a matching basis to approximately five funds or intermediaries that demonstrate a powerful use of catalytic capital across sectors and geographies

Work with

https://www.convergence.finance/⁠

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https://www.top1000funds.com/2020/01/insurance-giants-push-for-more-impact/#:~⁠

:text=Insurance%20companies%20are%20often%20public,which%20take%20time%20to%20change.

Securitization

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https://thegiin.org/current-members⁠

all their members

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https://thegiin.org/investors-council#zurich-insurance-group⁠

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AO doing impact investment, look up their annual report, ESG

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https://milliman-cdn.azureedge.net/-/media/milliman/pdfs/articles/esg-considerations-in-the-insurance-industry.ashx⁠

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Research to be done

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Production leasing/financing fund⁠

(also a project)

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https://www.yieldstreet.com/resources/article/supply-chain-financing⁠

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GIIN's research

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https://www.rockefellerfoundation.org/wp-content/uploads/FARockefellerFinalPDF_1.pdf⁠

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Rockefeller Zero Gap initiative

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https://impactalpha.com/catalytic-capital-impact-investors-unlock-off-grid-energy-financing-with-first-loss-guarantees/⁠

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https://beyondtradeoffs.economist.com/exploring-diversity-impact-investing-practices⁠

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https://omidyar.com/news/new-report-helps-investors-who-want-to-achieve-financial-returns-and-social-impact-find-the-right-opportunities/⁠

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https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/impact-investing-finds-its-place-in-india⁠

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There was a "first global summit of all development banks" in early November, 2020. Following from that, I'm hoping to spend some time early in C1 2021 trying to figure out how to get GFI a seat at the table when their "Agriculture Cluster" next meets. Here's the Ag Cluster's statement on "

Investing in Sustainable Food and Agriculture Systems: the Role of Public Development Banks⁠

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https://axial.substack.com/p/funding-models-in-life-sciences⁠

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Blake did u analyze ICOs Meatcoin Prime roots is a great model for e-commerce (add crowdfunding)

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https://www.macfound.org/media/files/C3_Introductory_Resources.pdf⁠

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https://omidyar.com/wp-content/uploads/2020/09/Across-the-Returns-Continuum.pdf⁠

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GIIN launched a Blended Finance Working Group

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https://www.convergence.finance/⁠

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https://thegiin.org/research/publication/the-state-of-blended-finance⁠

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https://thegiin.org/assets/upload/Blended%20Finance%20Resource%20-%20GIIN.pdf⁠

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Join Convergence!

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https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/bf⁠

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Might require its own white paper/2-pager

Research & analysis

Impact scale

Tractability

Neglectedness

Startup Venture involvement

Commercial incumbent involvement

GFI involvement

Who do we talk to?

Solution/resource development

Targeted engagement

Events

Split into separate ideas

Solutions we do

Solutions we share via targeted engagement

Solutions we publish publicly

Solutions we do more research on

Capital providers > Developer > Pool/YieldCo (REIT) > Management company > Tenants

We could play in each part of this chain

If a developer bankrolled a project, the company could lease it, build to suit to lease

Note which funds we want to start are catalytic vs. non-catalytic

Create a topical cluster around these concepts

Ari Nessel, interview him or someone who he knows

Merchant developer takes developer risk, then flips to low risk pool, REIT, REIT are lower risk pool, these developers, some REIT’s do some developing, but not a

MII, catalytic capital, research institute

Malls have parking, public transport access

Repurposing study

Multi-tenant industrial, common, dividing walls is easy, designed as giant boxes that can be divided or subdivided easily, single tenant or multi-tenant

Incubators, scaling network, companies start by sharing equipment early, then move to their own space over time . these are often PPP, economic development corporations. WeWork for manufacturing, industrial, this has to exist

Could we just lease existing buildings and then sub-lease out, like WeWork?

who has a lot of excess industrial capacity? Churches. Malls. Malls are key.

Research on capital, funds, investors, investment structures and mechanisms

Capital

Create a YieldCo, publicly traded company holding production infrastructure assets that are low-risk, predictable gains

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https://www.linkedin.com/in/katherine-stodulka-a2b63b49/⁠

, she is great, the kind of person we need for this.

Systemiq notes⁠

Credit Suisse SDG 12 listed fund

Pension funds, SWF's focus on infrastructure

Like Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs), YieldCos are pass-through stock entities designed to allow for generous dividend yields and, at least in theory, strong long-term dividend growth.

Source⁠

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YieldCo's are a renewable energy utility KEY IDEA

WHAT THINGS DO WE WANT TO BE A UTILITY? EVERY PART OF THE CHAIN!

The renewable power plants operated by YieldCos typically obtain long-term, fixed-fee power purchase agreements (PPAs) from utility companies to buy the clean energy they generate.

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Master Limited Partnerships⁠

, general partners hold 2% stake (w/ option to increase), issues units (like shares) to limited partners that are traded on national stock exchanges, for stable, slow-growing industries

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https://www.investopedia.com/terms/r/reoc.asp⁠

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A real estate operating company might fund new construction and then sell the property for a return. The company could also buy a property, refurbish the building, and then resell the real estate for a profit. A REOC could likewise serve as a management company that oversees the properties.

OpCo, PropCo

Casino companies are often OpCo's

Could apply to so many things, conttract or self-operated capacity

https://www.investopedia.com/⁠

for different types of investors, structures, etc

Distributions reinvestment in REIT, lookup simply safe explanation

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https://informaconnect.com/finance/⁠

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Private capital

Private equity

Venture capital

Private credit

Real assets

Wealth & investment management

Trade finance

FinTech

Risk Management

Insurance

Alternative investment

Project & Infrastructure Finance

Quant Finance

Corporate Finance

Look for visual charts/diagrams flowcharts of capital, investment, finance, the type of secret money Mark was talking about,

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https://www.bridgespan.org/insights/library/philanthropy/audacious-philanthropy-case-studies⁠

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https://www.bridgespan.org/insights/library/impact-investing/what-is-impact-investing⁠

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https://www.bridgespan.org/getmedia/8a59ecf1-f588-45bd-8466-6b5328941d5d/impact-investing-return-impact-image.aspx⁠

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https://www.bridgespan.org/about-us/about-bridgespan⁠

see if they can help us

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https://www.bridgespan.org/getmedia/dcb02e50-e31d-4d5c-9530-ae848b2b39f3/impact-investing-ecosystem-920px.aspx⁠

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SLideplayerer⁠

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https://medium.com/@asicapitalcoloradosprings/debt-instruments-and-its-different-types-asi-capital-colorado-springs-5add4ec6c126⁠

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https://www.trilliuminvest.com/⁠

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https://en.wikipedia.org/wiki/Category:Corporate_finance⁠

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https://en.wikipedia.org/wiki/Category:Types_of_business_entity⁠

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https://www.factore.com/⁠

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Japan’s Designated Utilization Foundation

EIF has their social impact accelerator, look more into this

The EIF aims to build a market in which social enterprises of many types and at many stages can raise capital tailored to their needs. It manages three social enterprise instruments under the European Fund for Strategic Investments 23. 1) The first instrument invests in or alongside funds linked to an incubator or accelerator. It intends to expand investment in very early-stage social enterprises. 2) The second instrument invests alongside business angels or in business angel funds. It intends to expand investment in early- and growth-stage social enterprises. 3) The third instrument invests in or alongside intermediaries investing in social programs delivered under payment-by-results arrangements. It intends to expand investment in social impact bonds and similar payment-by-results arrangements. The EIF also manages two social enterprise instruments funded by the EU’s Employment and Social Innovation program. 1) Capacity Building Investments Window. The Window invests in intermediaries that finance social enterprises or offer microfinance products. It aims to seed new intermediaries and strengthen intermediaries already in the market24. 2) Guarantee Instrument. The Instrument guarantees up to 80% of an intermediary’s loans to social enterprises (loans up to €500,000) and microfinance applicants (loans up to €25,000)25.

Quadratic funding

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https://80000hours.org/problem-profiles/#public-goods⁠

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If we could make society better at providing public goods in general, we might be able to make progress on many challenges at once. One idea we’ve discussed that both has promise and faces many challenges is

quadratic funding⁠

, but the space for possible interventions here seems enormous.

Tasks

Integrate these notes into Manasvi/Manuela report

Create 2-pager and blog for sharing with everyone

Pull insights/phrasing from longform playbook

GIIN Catalytic capital report notes

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Catalytic Capital report⁠

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Example: Bank letters of credit facilitating trade financing

Example: US Small Business Administration guarantees up to 85% of commercial loans made to small businesses (SBA 7a loan program)

People from these case studies would be great advisors if we launched funds

Example: Fannie Mae and Freddie Mac credit enhancement for home mortgages

Credit enhancement, catalytic credit enhancement tools

Credit enhancement tools

Government loan guarantees

Letters of credit

First-loss capital

Over-collateralization

Insurance

Reserve accounts

Look up GIIN’s publications on the other credit enhancement tools

Debt, equity, or guarantees

GIIN may have other catalytic capital and blended finance reports, share blended finance with Dev team as an idea

Page 4: Figure 1, investor providers of first-loss vs. recipient investors

Page 5, definition

More patient, more flexible

Page 6: Table 1, instruments used

One characteristic of Providers is that they are strongly aligned with the Investee’s social or environmental goals and theory of change. Another is that they are willing to take on greater financial risk in return for driving towards target non-financial objectives. A third is that they may have a deeper knowledge of the target sector or geography and, hence, a better understanding of the risks, than mainstream investors. Given these characteristics, Providers are typically foundations, high-net-worth individuals, governments, and Development Finance Institutions (DFIs); however, any investor with the appropriate motivation and risk appetite can, of course, play this role.

“Philanthropy must do what it does best: peel back the first layer of risk, and experiment where other sectors cannot, making development and commercial investment dollars more productive and less risky” DR. JUDITH RODIN, PRESIDENT, THE ROCKEFELLER FOUNDATION

Page 7: Value prop for providers

Page 8: Value prop for recipient investors

Page 12, leverage for impact, small amount of CFLC results in massive amounts catalyzed

Page 14: Peak 2, losses go to C first, while returns go to A first, multiple levels

Page 16: Case study, using debt

Designed to prove a market, with reduced or eliminated loss protection for future investments

Page 28: Multi-layer investing, JP Morgan Foundation provide CFLC, and JP Morgan Chase invests in senior debt as a recipient

This debt waterfall seems common, so applying philanthropic dollars as the most junior position is the innovation

This type of multi-level investing on the part of a single institution may be particularly attractive

to foundations, which can provide credit enhancement using their grant or program-related investment (PRI)22 funds and invest in more senior positions using their PRI or endowment

allocations.

Appendix: Questions for participants

Omidyar Network, an investment firm started by eBay founder Pierre Omidyar and his wife Pam, and Blue Haven Initiative and Candide Group, both family offices, have made substantial impact investments and done significant “catalytic” work

Additional thoughts

Add attached image

An estimated

$30 trillion of wealth⁠

will be passed down from baby boomers over the next 30 years to younger generations who, research reveals, are eager for a range of investing opportunities, particularly those that maximize breadth and depth of impact.

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