De-Risking: Multi-Donor Funds for Catalytic Impact
So far, the de-risking challenge remains unsolved, yet multi-donor funds for Catalytic Impact might offer a solution or a pathway towards a solution. De-risking involves minimizing financial risks to entice investment into projects or businesses. Projects and startups frequently seek funding to finance the project preparation phase, which is expensive and carries higher risk. This phase often includes feasibility studies and social-environmental assessments essential for determining a project's viability. Consequently, they must either attract investors willing to accept these initial risks or identify methods to de-risk their projects, such as securing concessional funds or technical assistance, to alleviate the concerns of for-profit investors. Multi-donor funds can pool resources and expertise, offering a collective approach to absorb early-stage risks and thus make projects more appealing to impact investors seeking market returns.
🤔 Check out this insightful article about Multi-Donor funds for Catalytic Impact written by Tim Freundlich, a form of blended finance instrument to "de-risk" impactful investments. A collaboration between philanthropy and impact investors.
💡 Multi-Donor funds for Catalytic Impact is a form of blended finance vehicle that helps de-risk projects for investors. If you are an investor looking to invest on impactful project, this is a vehicle that you should look into. If you are a company looking for funds to de-risk your impactful project for the project preparation phase, this may be a type of investor that could be interested in your venture...
🔖 It's a very detailed article that gives:
- examples of multi-donor funds done for the creative economy, climate solutions, gender equality and racial equity
- elements of fund design
It is also reminiscent of my 2019 article on the collaboration between philantropists and investors.
De-risking projects through a blended finance instrument by pooling different types of investors is exactly what we endeavored to do (when I was part of the IRAC Task force led by the Caribbean Climate Smart Accelerator) when we prepared the groundwork to create the CBRF fund.
Happy to connect if you are interested to discuss this topic. Book an appointment here.
