Over the course of our (nearly) 25 year history, Root Capital has pioneered a blended finance model, working to shift the paradigm of agricultural finance through social entrepreneurship and creative thinking. Our blended finance approach helps us to generate outsized impact by bringing together a diversity of supporters with mandates spanning the spectrum of impact, risk, and return objectives.
In honor of National Philanthropy Day, I’d like to take a moment to highlight the catalytic roles that philanthropy and impact-first capital play in our blended finance model and in bringing prosperity and security to some of the world’s most vulnerable rural communities.
I recently had the pleasure of speaking alongside Katie Macc, Chief Operating Officer at Sorenson Impact, at our Catalyzing Blended Finance for Impact webinar, facilitated by Scott McDonald, Root Capital’s Chief External Affairs Officer. Sorenson Impact serves the needs of underserved communities around the world by supporting innovative, game-changing startups and the impact investing space broadly. Katie’s depth and breadth of experience in impact investing (including partnering with Root Capital in her former role at The David Weekley Family Foundation) brought an outstanding, third-party perspective to the conversation.
Blended finance strategically combines various types of capital–such as philanthropic grants, impact-first investments, and targeted guarantees–to catalyze capital flows and maximize impact.
Katie expanded on this idea, citing that “key components of blended finance often encompass a mix of public funds, private investment, philanthropic contributions, engaging with organizations through layered financing structures and innovative financing models.”
While a somewhat complex topic, we have broken down Root Capital’s approach to blended finance into its constituent parts, outlined in this short primer. The two-minute video below also demonstrates the key foundational concepts of blended finance.
During the webinar, Katie, Scott, and I discussed Root Capital’s distinctive, diversified approach to blended finance, in which we provide opportunities for supporters with varying risk-return-impact mandates to collaborate in generating much-needed impact. Katie added a fantastic perspective, relating her experience in aligning capital with social and environmental impact as an asset allocator, and including insights on how philanthropic and investment capital combine to form a powerful approach to unlocking impact—an approach generating results far greater than those achievable by any single “flavor” of capital in isolation.
We each went on to share unique examples of the proven successes of blended finance. I was proud to highlight Root Capital’s collaboration with a private foundation to design a targeted guarantee facility that made it possible for Root Capital to continue its critical lending and advisory work in the Democratic Republic of the Congo during the 2018-2019 Kivu Ebola epidemic. Katie followed up with a case study on how the New York City Housing Acquisition Fund implemented a blended finance structure to incentivize developers to commit to building affordable housing. We concluded with a discussion on tackling real and perceived barriers to investment in development (including a bit of myth-busting) and highlighting the crucial role of donors and impact-first investors in catalyzing real-world impact.
I invite you to watch the full webinar, download the primer, and bookmark the video to learn more about the critical and catalytic role that a blended finance approach can play in driving capital flows to further global sustainability, equity, and opportunity.
About the Author
Gian Fabbri is the Senior Director of Finance and Analytics at Root Capital.