Rockefeller Foundation champions catalytic capital's impact
The Rockefeller Foundation is keen to encourage all forms of capital to scale up investing with impact even as it drives catalytic capital growth, a top executive told AsianInvestor.
“The Rockefeller Foundation's programmatic investments seek to demonstrate the potential of catalytic capital," Deepali Khanna, vice president, Asia regional office of The Rockefeller Foundation, told AsianInvestor.
"Catalytic capital is about prioritising impact and investing in a balanced, flexible and patient manner that is guided by core values."
Catalytic capital refers to debt, equity, guarantees, and other investments that accept disproportionate risk and/or concessionary returns relative to a conventional investment in order to generate positive impact and enable third-party investment that otherwise would not be possible.
The foundation’s approach is typically to partner with global financial institutions and other institutional investors looking to deploy capital for impact at scale, said Khanna.
The finance team seeks to collaborate with organisations operating across the impact and risk-return spectrum, because all types of capital have a role to play in order to drive impact at scale, she said.
Philanthropy, she noted, can play a particularly important role in catalysing investment and "mainstreaming impact by addressing certain persistent market failures."
Apart from philanthropic donors, the foundation’s partners include development finance institutions, pure-play impact investors, institutional investors such as banks, insurance companies, pension funds, sovereign wealth funds, and corporates.
“We seek to identify and co-develop select opportunities that require short-term philanthropic support to scale but have strong potential for sustainable commercial investment in the medium-term,” she said.
Khanna joined The Rockefeller Foundation in 2015 as director of the foundation’s $75 million Smart Power for Rural Development, which later became Smart Power India, to provide affordable and clearn energy access to over a million people in India.
Based in Bangkok, she leads efforts of the Asia regional office to build networks with different institutions, leverage financing and collaborations among other activities.
BUILDING SCALE
The Rockefeller Foundation, one of the oldest and biggest in the world, began with an original endowment of $100 million from John D. Rockefeller, founder of Standard Oil, which once controlled more than 90% of petroleum production in the United States.
Building upon the $24 billion of philanthropic capital it has invested since 1913, the foundation aims to encourage scaled investments and seeking science-based yet creative solutions to intractable problems.
The foundation in September announced it will invest over $1 billion over the next five years to advance the global climate transition agenda.
It has also, in recent years, become the largest US foundation to embrace the movement to divest from fossil fuel interests while refraining from future investments in the sector.
The Rockefeller Foundation has deployed resources in Asia for over a century.
It was instrumental in creating Thailand’s first health ministry and helped establish Peking Union Medical College in 1921, which contributed to building modern public health across Asia.
In more recent years, the foundation has focused on expanding access to reliable power across India and Myanmar, improving healthcare in rural India, and advancing the uses of data science and sustainable finance to improve the health and working conditions of millions in the region.
Through the choices of its projects, the foundation seeks to accelerate the project’s time to market, scale and hopes to create the ‘demonstration’ effect to drive replication.
Demonstration effects refers to the tendency of people to imitate the behaviour of others after observation.
INNOVATIVE INVESTING
The Rockefeller Foundation collaborates across philanthropy, private and public sectors.
“We are seeing a wave of innovation sweeping the global financial sector, from public equities to bonds, real estate to insurance, venture investing to small-business lending,” said Khanna.
“In each of these areas, innovative players are using an ever-growing range of instruments to achieve social and environmental benefits, while producing attractive returns.”
The foundation hopes to directly mobilise up to 30 times of its program-related investment allocations.
"We anticipate the investment products we co-develop to be replicable in other contexts and/or by other institutions by sharing design and learnings,” Khanna added.
The Rockefeller Foundation’s investments are structured as program-related Investments (PRIs), an instrument that is in compliance with US tax laws while advancing the foundation’s charitable mission.
“PRIs can be structured as all instrument types or class – for example, debt, equity, guarantee, advanced market commitment, etc,” she noted.
Among its more recent initiatives to amplify its investing effect is the Zero Gap Fund (ZGF), an impact investing collaboration between the Rockefeller Foundation and the John D. and Catherine T. MacArthur Foundation and its Catalytic Capital Consortium.
ZGF, launched in 2019, deploys flexible, patient and risk-tolerant capital to catalyse private investment into strategies that address the UN Sustainable Development Goals.
“The Rockefeller Foundation’s management of the Zero Gap Fund marks the first time that one private charity has managed the money of another private charity. We collaborated to create this opportunity because together, it not only represents a bigger bang for its buck, but also because The Rockefeller Foundation, which... coined the term 'impact investing', has prioritised investing in our internal expertise in this area,” said Khanna.
ZGF has two investments in Asia: Leapfrog Investments’ Emerging Consumers Fund, which provides access to financial services and healthcare for emerging consumers in sub-Saharan Africa, South Africa and Southeast Asia; and the Impact Investment Exchange’s Women’s Livelihood Bond II, which provides capital and other assistance to women-owned businesses in Southeast Asia.
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