In climate finance, stories of âcapital gapsâ abound. You might think of a capital gap in simple terms as a shortage of money. But scarcity is rarely the whole story. A deeper challenge often lies in misalignmentâbetween the needs of investees and the expectations or constraints of the investors who might fund them. The latest guide from Harvey Koh and the Catalytic Capital Consortium drives this point home.
Our team at Prime Coalition has seen this story play out firsthand, as weâve spent more than a decade deploying catalytic capital for climate innovation. What weâve learned mirrors Kohâs new framework: careful diagnosis of capital gaps, paired with disciplined program design, is required in order for catalytic capital to actually shift markets and systems.
Intention before intervention: Using misalignment diagnostic to design investment programs
Prime Coalition was founded to mobilize catalytic capitalâinvestment that deviates from market terms such as risk appetite, time horizon, or return expectationsâfor climate solutions. We use charitable contributions to advance untapped climate solutions with speed and scale, by derisking companies, projects, and funds that commercial investors would not otherwise be able to support. Our program design anchors on a core argument in Kohâs guide: effective catalytic investing starts by understanding why capital is not already flowing from other sources, both public and private.
In 2023, Prime launched Trellis Climate, a one-of-a-kind program to address financing barriers in deployment of first-of-a-kind, or FOAK, climate infrastructure. Before Trellis made a single investment, we commissioned in-depth capital gap substantiation research to identify where the blockages were most severe for FOAK projects.
The findings, detailed in our 2022 report, showed that while infrastructure capital technically existed, it wasnât structured to meet the needs of the earliest-stage projects. Institutional investors expected project risk profiles and timelines that simply didnât match the realities of emerging climate infrastructure.
Armed with a deep understanding of the misalignment, the Trellis Climate team then prepared to surgically intervene. They designed programming specifically to bridge these misalignments. They deploy capital where modest risk tolerance, patient time horizons, and flexible structuring can unlock private participation that would not otherwise occur.
Trellis has provided development capital for companies to meet key commercial milestones, construction capital to derisk projects for access to private project finance capital, and is currently building a new insurance program to give climate startups access to liquidity to support their commercialization priorities.
Complementary actions matter: Systems change requires infrastructure alongside capital
Even the most thoughtful catalytic investments canât close gaps on their own. Kohâs framework highlights that catalytic capital requires complementary actions to be effective. Thatâs why at Prime, we are dedicated to building field-wide knowledge infrastructure alongside our own catalytic investing strategy.
Through Project Frame, weâve built shared frameworks that help investors articulate and measure forward-looking climate impact. This common language builds trust and comparabilityâtwo ingredients essential for scale. Similarly, our free, open-access CRANE Tool makes impact analysis more accessible by allowing anyone to estimate a companyâs climate impact potential quickly and transparently.
These initiatives have allowed us to share our lessons learned and urge other investors to prioritize climate impact, helping to scale climate solutions beyond our own catalytic investing practice. The Project Frame community has reached over 1,300 observing members, including more than 400 venture capital and private equity investment firms. Among the members of Project Frame who publicly reported emissions impact in 2024, they reported over 81 million metric tons of CO2e emissions reduced or removed by their portfolio companies in that year alone. Meanwhile, over 6,000 CRANE users have joined Prime in estimating forward-looking emissions impact with rigor and transparency.
Stepping back and seeing the system: Choosing where to start
The catalytic approach of diagnosing capital gaps and designing a suite of interventions to fill them can be inspiring. But capital gaps exist everywhere you look, and deciding where to take action can also be paralyzing. Koh urges practitioners to assess not only where gaps lie, but where intervening will be most meaningful and additive given oneâs mission and capabilities.
Joyfully, the field of catalytic investing and blended finance has grown observably over the past decade, to the point that there is now a surplus of investment funds eligible for charitable support. Philanthropists in 2026 and beyond will confront a new challenge: distinguishing between all the catalytic investment opportunities that might be eligible, in order to optimize for those that are the “highest and best use” of charitable capital.
In recognizing this growing need, we at Prime have undertaken an in-house research effort to decide which among the many urgent areas of climate need we will prioritize for capital orchestration in the coming years, so that we can provide philanthropists with a trusted partner purpose-built to support their catalytic capital allocation for climate.
Our research started with collecting public data on the critical systems and geographies for climate action worldwide, where climate change mitigation, climate adaptation, and disparities in human thriving intersect most strongly. Next, we began engaging with on-the-ground experts who are living and breathing the challenges within these boundaries. They are helping us surface the key activitiesâwhether investable or notâthat must occur in concert to transform each system in its specific regional context; this diagnostic step takes a holistic look at the patient.
We are prioritizing boundaries where Prime can make a unique difference through our nonprofit programming, where local partners can effectively convene and coordinate other actors, and where the field of investment managers is robust enough to support an effective environment for catalytic investing.Â
In the coming year, we will be busy planning Primeâs surgical intervention(s) in these systems, based on our unique capabilities and our emphasis on additionality. We will pursue deep partnerships with âbackbone organizationsâ that are already working to coordinate stakeholder action and identify specific barriers. In a regional food system, for example, we might find that a combination of farm-level transitions to regenerative agriculture, regional processing and logistic capacity building, and efforts to slow land-use change is critical to trigger ripple effects in system dynamics and characterize their specific financing misalignments.
We will then be ready to design responses to capital gaps with those same partners, whether that response be a catalytic investing program (e.g., creative risk-sharing mechanisms for farmers and project finance for regional infrastructures) or a complementary initiative (e.g., a land-use monitoring system). This disciplined process ensures that Prime wonât overstretch itself by trying to fill every gap. Instead, we will focus exclusively on where Primeâs resources can be most meaningful to unlock structural change in coordination with other stakeholders.
No matter which systems or geographies drive your work, we encourage all philanthropists and catalytic capital investors to lean on Kohâs guidance. Rather than starting from what tools are available, focus instead on finding and substantiating the capital gaps that will advance your mission and then ask how you can best coordinate with others to fill them.
Besides providing catalytic capital for deployment, philanthropists must also come together to support the infrastructure needed to orchestrate across capital providers and achieve meaningful scale, because catalytic capital is not a blunt instrument suitable for all jobs â it should be used surgically to best effect for the health of our planet and species.
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Anna Goldstein is Chief Program Officer and Alban Yau is a Senior Associate, Impact at Prime Coalition.
