Good intentions are not enough.
A lively discussion erupted during the holiday break over the troublesome reality: If impact investing is so good, why are things still so messed up? More to the point, if impact investing is so attractive, why does capital remain in such short supply where it’s needed most?
One answer, it seems, is that impact investing may not be so good, nor that attractive.
“Luckily, I have a solution to the myriad disappointments of impact investing,” Mulago Foundation’s Kevin Starr writes in Stanford Social Innovation Review. “Get rid of it.”
Starr’s screed is the latest critique of those investors who claim to point their portfolios toward impact but continue to insist on risk-adjusted “market rates” of return (see, for example, our take on TBLI Group’s Robert Rubenstein’s provocative takedown of the “impact mafia”). Intentions without concessions have left unfunded many needed innovations, particularly in poor countries, he says, an especially cruel irony as traditional foreign aid dries up.
“It’s not going to happen without concessionary finance,” including cheap loans, risky equity positions and, yes, straight-up grants, Starr says. “That leaves us with just philanthropy and commercial investing.”
Many of the thoughtful responses conceded, and even piled on, to Starr’s critique of market-rate impact investing, but not necessarily to his binary framing (see, for example, Dalberg’s Kusi Hornberger’s four salient objections). For financing high-impact – but possibly low-return or high-risk – ventures, there is an emergent third way: impact-first investing.
“We’re just using capital to have measurable, demonstrable impact on sectors that matter,” Ceniarth’s Greg Neichin said on ImpactAlpha’s Agents of Impact Call in October, which charted the “surprising resurgence” of impact-first investing. Ceniarth, the London-based family office of Diane Isenberg, is a long-time champion, having deployed $500 million of impact-first capital over the past decade. The Call also featured Trimtab’s Caleb Ballou, Spring Point Partners’ Margot Kane, A to Z Impact’s Alex Evangelides and MacArthur Foundation’s Debra Schwartz.
“The ultimate beneficiaries – small farmers, shop owners, low-income workers – they don’t care why we do this,” Neichin said. “They just care that money gets into communities that actually help vulnerable and marginalized people.”
Impact-first investing doesn’t preclude returns, but locates the primary duty in the problem to be solved, not the profit to be made. In Kenya, Mulago helped launch Pula to provide smallholder farmers with weather and pest insurance. Mulago provided a $50,000 grant in 2012 and six years later followed with $300,000 in debt, which has since been converted into equity (see, “Pula lands $20 million to offer livestock insurance to smallholder farmers”).
“Pula is now serving five million farmers, and our equity stake grew to six times our investment. We cashed out $400k and still own 2% of the company,” Starr writes in his essay. “Sometimes patience works out pretty well.”
Family matters
If “impact first” is becoming a rallying cry for some wealthy families and others willing to break free of traditional “market-rate returns” expectations, there’s still the question of how and where to deploy that capital.
Into that gap in 2025 stepped Trimtab, an “unapologetically impact-first” holding company, which was incubated by The ImPact to create the market infrastructure for asset owners to impact-first strategies. The “holdco” structure, rather than a closed-end fund or a regulated investment vehicle, “allows us to get up and running and to be making investments with a lot of flexibility and fluency,” Trimtab’s Caleb Ballou told ImpactAlpha in the first in-depth profile of the new company.
Trimtab has so far raised more than $60 million from seven wealthy families, and made 10 investments totaling $15 million with fund managers including Acre Impact Capital, Common Trust and Seven Generations Capital.
“So much of this is just about how we cut the pie differently,” Alex Evangelides of A to Z Impact, the family office + foundation founded by Jeffrey Kaplan, said on The Call. “If you, as the investor, are willing to take a smaller piece of the pie, it can go somewhere else — and a lot of good things can happen if you do.”
Spring Point Partners’ Margot Kane described the family office of Philadelphia’s Berwind family as “built for purpose – purpose over convention or over tool.” Spring Point blends grants, investments, and other forms of support to champion community-driven change and promote economic justice and ownership.
“Impact-first doesn’t mean concessionary,” said Kane. “It means aligned values and smarter risk-taking.”
“People working from the allocator’s seat have the power to reset, to reframe, to suggest what risks are worth taking and which discomforts worth enduring in order to continuously improve and push for better outcomes for all,” Kane added in ImpactAlpha’s year-end survey of impact LPs.
True cost of impact
Impact-first fund managers have likewise become more confident in their market positioning. In October, Open Road Impact, along with Acumen, Kiva, the Miller Center for Global Impact and four other impact-first fund managers released a study, “The True Cost of Impact-First Investing.”
Impact-first funds match or outperform commercial funds on deals per year, and cost per deal, the study found. Such funds do incur higher cost per dollar deployed, driven by things like smaller ticket sizes and hands-on support. Such costs “reflect the price of inclusion,” the report said.
Catalytic investments in the study enabled at least six-fold (and up to 40x) growth in reach and scale of impact. “The findings suggest that strategic subsidy is not a stopgap,” the authors wrote. “It’s a force multiplier.”
Open Road’s Caroline Bressan will dig into the true cost of impact-first investing in ImpactAlpha’s Agents of Impact Call No. 77, set for Wednesday, January 21 at 10am PT / 1pm ET / 6pm London.
In her ImpactAlpha guest post, “Standing up for impact-first capital,” Bressan argued that the impact investing sector has “over-indexed on chasing financial returns with the goal of crowding in market rate, often institutional, investors.”
“We have lost sight of impact’s biggest priority – creating impactful solutions,” she said. Bressan called on allocators to carve out allocations to impact-first strategies and to accept that a percentage of portfolios can deliver return less than “market rate” in exchange for impact outcomes. “Stop being embarrassed” by the tradeoff that can help reprioritize the original tenets of impact investing, she urged
Open Road led by example, converting to a nonprofit to pursue greater risk, rebranding to center impact, and raising $35 million from impact-first family offices, including Ceniarth, A to Z Impact and Stardust.
The “Transformative 25” list of impact-first funds from Collective Action for Just Finance includes place-based funds, indigenous-led funds, and funds focused on democratic ownership. On 2025’s list, Open Road is joined by Total Impact Capital, Seacoast Trust, The Fund for Jobs Worth Owning, Community Credit Lab, Clarke Street Fund and more.
Smarter catalytic capital
MacArthur, along with Rockefeller Foundation and Omidyar Network, launched the Catalytic Capital Consortium in 2019 to broaden the deployment – and the appeal – of flexible investments that accepts disproportionate risk or concessionary returns to generate outsized impact and crowd in commercial capital that wouldn’t otherwise participate (disclosure: C3 supports ImpactAlpha’s coverage of catalytic capital).
The consortium has grown to a dozen members, including Ceniarth, Blue Haven Initiative and Builders Vision. In May, the Ford, Sorenson Impact, and Surdna foundations joined C3.
“Rising interest in catalytic capital is particularly encouraging because it deepens and extends the reach of impact investing overall,” MacArthur Foundation’s Debra Schwartz told ImpactAlpha.
To highlight key design principles in addressing capital gaps, ImpactAlpha collaborated with the Catalytic Capital Consortium on a series of guest posts and case studies based on C3’s publication, “Addressing capital gaps: A guide to strategic deployment of catalytic capital.”
“Catalytic capital remains a crucial yet scarce resource,” wrote Harvey Koh of the C3 in “A case study in unlocking lending to small businesses to accelerate solar in India” to kick off the series. “We urgently need our catalytic capital to work harder than it ever has before.”
Also in the series:
- “Catalytic capital is a surgical tool to fill capital gaps,” by Prime Coalition’s Anna Goldstein and Alban Yau.
- “Catalytic capital can do more than fill gaps—it can reshape our economic system,” by Alison Lingane of Ownership Capital Lab and Julie Menter of Transform Finance.
- “Overcoming the mindset barriers that keep investors away from employee ownership,” by Spring Point Partners’ Margot Kane.
- “Why catalytic capital matters now,” by Small Foundation’s Karina Wong.
