To Meet the SDGs by 2030, We Must Attract New Streams of Impact Capital
The math is simple: The cost of solving the world’s most critical problems – poverty, hunger, disease, inequality, climate change – runs into the trillions of dollars. Yet the world’s philanthropic funds, even when combined with the global development and aid budgets of governments, add up to only a fraction of this funding need. How do we close this gap?
Currently, more than $200 trillion in private capital is invested in global financial markets. Together, we must find innovative and catalytic solutions to mobilize private capital to close this widening gap between those with hope and prosperity, and those without. Collaborative, catalytic investment is essential to fill the development-financing gap and help address pressing global challenges.
Earlier today, the MacArthur Foundation launched a new effort called the Catalytic Capital Consortium (C3), where MacArthur Foundation is dedicating up to $150 million to invest on a matching basis in approximately five funds or intermediaries that demonstrate a powerful use of catalytic capital across sectors and geographies. The Rockefeller Foundation is excited to be a member of the C3 Consortium.
This pioneering partnership between MacArthur and Rockefeller will establish a unique impact investing collaboration where each plans to invest $30 million to help meet the UN Sustainable Development Goals (SDGs). These funds are expected to be managed by The Rockefeller Foundation’s new impact investment management platform, Rockefeller Foundation Impact Investment Management, which once fully operational, aims to tap mainstream markets and investors and scale up investment into promising new ventures that help close the SDG funding gap.
Collaborative, catalytic investment is essential to fill the development-financing gap and help address pressing global challenges.
At The Rockefeller Foundation, our belief is that by using philanthropic resources as society’s “risk capital”, we are able to attract the level of private capital needed to address significant economic, social, and environmental challenges represented by the SDGs. Philanthropic capital gives investors peace of mind in pursuit of financial and social returns, and we are uniquely able to provide it.
With this in mind, we created Rockefeller Foundation Impact Investment Management (RF IIM) to take a bold new step for the Foundation’s impact and sustainable investing work. Over a decade ago, the term “impact investing” was coined at the Foundation’s Bellagio Center, putting a name to a nascent concept. Since then, we’ve not only invested more than $200 million of our own resources while leveraging many times that in public and private capital, but we’ve also worked to build the necessary infrastructure for the impact investing field to take hold. For example, we incubated the Global Impact Investing Network (GIIN) to increase the scale and effectiveness of impact investing, and helped to establish the Impact Reporting and Investment Standards (IRIS) and the Global Impact Investing Ratings System (GIIRS) to track reporting and performance standards for impact funds.
Today, our best-in-class Innovative Finance team – which has developed dozens of breakthrough financing solutions to help close the SDG funding gap – is a magnet for other foundations and funders that want to improve people’s lives through science-based, partnership-based investing and philanthropy. That team is a big reason why this collaboration came about – and going forward, members of that team will splinter off to manage and build out RF IIM.
Philanthropic capital gives investors peace of mind in pursuit of financial and social returns, and we are uniquely able to provide it.
RF IIM is an asset management platform that gives us newfound capacity to aggregate and manage capital from like-minded partners to amplify impact in the Foundation’s core programmatic areas and drive the development of the impact investing field more broadly.
The first investment on the RF IIM platform is expected to be a $60 million investment partnership with MacArthur Foundation aimed at scaling The Rockefeller Foundation’s Zero Gap portfolio. Begun in 2015, Zero Gap aims to create the next generation of financing instruments with the potential to mobilize large-scale private investment toward the SDGs. What draws investors to the Zero Gap portfolio is its flexibility – Zero Gap is SDG agnostic, open to all instrument types or classes, geographies, sectors or market size. Since 2015, Zero Gap has grown from a handful of grants to nearly 50 investments across 28 countries.
Once formally launched, the Zero Gap funds managed by the RF IIM platform are expected to have a healthy pipeline of transactions in process. The first investment, currently being warehoused by the Foundation, is with Sixup, a company that helps high-performing, low-income students attend college. Sixup bridges the financial gap preventing individuals without FICO scores or co-signers from attending four-year colleges by identifying, underwriting and incubating loans to undervalued students – thus creating a new asset class branded as “Future-Prime.” By leveraging financial innovation alongside technology-enabled student support, Sixup hopes to boost a student’s education and social mobility through the entire lending lifecycle. The Rockefeller Foundation’s investment alone is expected to directly support loans to more than 2,500 students; beyond that, this promising solution has already attracted significant, additional investment from Goldman Sachs.
The second anticipated IIM investment is the Forest Resilience Bond, which supports forest management – the clearing of diseased, overgrown, or dangerous forest growth that can fuel wildfires – by providing upfront working capital to organizations like the U.S. Forest Service (USFS) and local utilities. Developed by Blue Forest Conservation, the bond helps overcome the estimated $60 billion need for forest restoration work in the United States. Private investors are repaid principal and interest through reimbursable grants from state governments and cost-sharing agreements with local investment-grade utility companies. The first project launched in 2018 to make 15,000 high-value acres of Tahoe National Forest more resilient.
We are guided in this work by a simple fact: Now more than ever, scaling the highest, hardest walls in global development requires us to stand on each other’s shoulders. We must build ambitious partnerships – spanning the public sector, the private sector, philanthropy, and civil society – that match the scale of the challenges we seek to solve. Launching Rockefeller Foundation Impact Investment Management marks a significant step forward in that pursuit.