What do you mean by “catalytic capital?”
Catalytic capital is investment capital — debt, equity, guarantees — deployed on terms that accept greater risk or a lower return than a conventional investment would require, in order to generate positive impact and mobilize private sector investment that would not otherwise happen. It is used deliberately by mission-driven investors, including MDBs, DFIs, philanthropies, foundations, and family offices.
The Catalytic Capital Repository includes various types of “catalytic capital” and other risk-mitigation instruments, including:
- Guarantees (concessional and non-concessional)
- Concessional and catalytic debt
- Catalytic equity
- Grants aimed at investment vehicles, such as debt or equity funds, viability gap funding for project finance
Definitions of catalytic, concessional, and commercial capital by OECD, EVPA, Convergence, and GSG Impact| Terminology |  |  |  |  |
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| Catalytic | “[Development finance] increases the mobilization of additional financing for development, in particular from commercial sources. Can come from both concessional or commercial sources” | “Catalytic capital refers to capital deployed to achieve impact through the catalyzing effect of its intervention. It is the intentional approach that defines it, not the instrument or asset class that the capital represents” | “Also known as catalytic capital, concessional capital comes from the public and philanthropic sectors. It has low or no return expectations or is able to take on outsized risks and is used in a blended finance transaction to improve the risk/return profile of a deal to attract commercial capital that would otherwise not participate” | “Blended finance provided at concessional rates is commonly referred to as catalytic capital and is typically provided by philanthropic foundations or donor countries” |
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| Concessional | “Concessional loans: loans that are provided for at far lower than market rates, longer terms and with conditions which allow grace periods for payments” | “Capital that accepts lower returns compared to market rate” |
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| Commercial | “Commercial finance such as public and private sources of finance whose principal purpose is commercial rather than developmental” | “Capital seeking commercial returns” | “Commercial capital includes capital deployed by private investors or public and philanthropic investors (e.g., DFIs and MDBs) at market rates” | - |
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Catalytic: Definitions of catalytic, concessional, and commercial capital by OECD, EVPA, Convergence, and GSG Impact| Terminology | Catalytic |
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| “[Development finance] increases the mobilization of additional financing for development, in particular from commercial sources. Can come from both concessional or commercial sources” |
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| “Catalytic capital refers to capital deployed to achieve impact through the catalyzing effect of its intervention. It is the intentional approach that defines it, not the instrument or asset class that the capital represents” |
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| “Also known as catalytic capital, concessional capital comes from the public and philanthropic sectors. It has low or no return expectations or is able to take on outsized risks and is used in a blended finance transaction to improve the risk/return profile of a deal to attract commercial capital that would otherwise not participate” |
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| “Blended finance provided at concessional rates is commonly referred to as catalytic capital and is typically provided by philanthropic foundations or donor countries” |
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Concessional: Definitions of catalytic, concessional, and commercial capital by OECD, EVPA, Convergence, and GSG Impact| Terminology | Concessional |
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| “Concessional loans: loans that are provided for at far lower than market rates, longer terms and with conditions which allow grace periods for payments” |
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| “Capital that accepts lower returns compared to market rate” |
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| - |
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| - |
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Commercial: Definitions of catalytic, concessional, and commercial capital by OECD, EVPA, Convergence, and GSG Impact| Terminology | Commercial |
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| “Commercial finance such as public and private sources of finance whose principal purpose is commercial rather than developmental” |
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| “Capital seeking commercial returns” |
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| “Commercial capital includes capital deployed by private investors or public and philanthropic investors (e.g., DFIs and MDBs) at market rates” |
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| - |
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Sources: OECD Blended Finance definitions and concepts, Convergence, GSG Impact, EVPA
