The Special Role of Catalytic Investing

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What is Catalytic Investing? Putting More of Our Capital to Work for Community

by Bivium Westfuller

Since 2024, Bivium Westfuller has served as the Foundation’s Outsourced Chief Investment Officer (OCIO). This specialized, mission-aligned investment firm works with our investment committee and senior leadership to determine appropriate investment goals, asset classes and risk parameters, in accordance with our mission and strategy.

a graphic illustration of catalytic investing

A foundation’s investment portfolio can help advance its mission today — not just fund tomorrow’s grants. Most of us think of a foundation’s resources in two buckets: grants that enact the mission, and an investment portfolio that funds the grants. Catalytic investing can play a special role in a foundation’s portfolio by seeking to spark mission-aligned change through an investment structure rather than through grantmaking alone. We believe catalytic capital in a community foundation’s portfolio can deepen its local work in ways that less targeted investments cannot.

At Bivium Westfuller, we define catalytic capital as investments that accept more risk, lower financial returns, longer timelines, or less liquidity than conventional capital, with the objective of advancing mission-aligned outcomes and encouraging participation from additional investors. To qualify as catalytic, an investment must meet all three tests:

  • Additionality: it funds a venture, or accepts terms, that conventional capital won’t.
  • Impact: it is intended to advance mission-aligned outcomes.
  • Mobilization: it is structured to attract additional investment.

Why is catalytic capital a valuable part of a community foundation’s portfolio? Many promising community solutions — including affordable housing, small business lending in underinvested neighborhoods, emerging fund managers, and community development financial institutions — face financing gaps that conventional markets may not fill on standard terms. Catalytic capital is designed to help bridge those gaps. Recently, BWF helped a client underwrite a low-interest bridge loan intended to support a Native American tribe’s acquisition of 1,000 acres of ancestral land.  The client’s investment helped enable the tribe to complete the land acquisition.

Further, catalytic investing does not always require accepting concessionary financial returns. The MacArthur Foundation’s Catalytic Capital Consortium (C3) launched in 2019 with The Rockefeller Foundation and Omidyar Network reported that more than half of its initial investments were driven by a willingness to accept disproportionate risk rather than lower returns, and that its roughly $123 million portfolio helped mobilize up to approximately $3.1 billion in additional investment. 

For a community foundation, catalytic investing can take the form of program-related investments, loan guarantees, deposits in local Community Development Financial Institutions (CDFIs), or anchor commitments to mission-aligned funds, all while the core endowment remains prudently invested. Deployed thoughtfully, even a small allocation can help extend a foundation’s impact beyond its annual grantmaking.

Catalytic investing isn’t about replacing traditional grantmaking or prudent portfolio management—it’s about putting more of a foundation’s capital to work in pursuit of community impact. It’s about being there for your community when others are not, and showing people that your community is investable by being the first one in, taking more risk, or being loud and proud about supporting the changes that communities are making for themselves.

If you would like to learn more about whether catalytic investing may be appropriate for your portfolio and mission, we welcome the conversation.

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