In order to attract large investments from development banks and other institutional investors, impact-first funds often need subordinate investors to provide additional risk protection. While we generally do not play this role for new partners, we do have a history of supporting our key investees in this manner.

Conversely to junior commitments, there are often times where a fund has managed to secure significant first-loss and/or junior support and is still struggling to reach its full scale on senior capital. In these more de-risked cases, we try to stretch our allocation sizes to contribute meaningful amounts of senior capital.

Sub-market, patient capital is a key enabler in sectors serving deeply marginalized communities. For example, the US CDFI sector is highly dependent on long-term, philanthropic capital priced at concessionary rates. Similarly, our early, lower-cost loans to non-profit organizations operating in emerging markets proved to be highly catalytic. While our capital preservation model has flexibility on return, we are selective when we use this lever.

As many conventional impact investors are hesitant to engage with new, smaller funds, we can be instrumental in the earliest stages of a new vehicle. These funds might even be targeting finance-first returns, but might be so early as to not be acceptable from a risk perspective to others. Our early commitments to a diverse set of managers such as Lendable, AGC, SunFunder, and others led to thriving funds. When these funds have meaningful risk, we often look for grant or first loss buffers that can increase our comfort.

Perhaps the highest risk activity that we engage on, providing early, pilot debt to high impact social enterprises is an important, albeit limited, lever that we employ. We tend to look for enterprises that have achieved, or are very near to achieving, profitability, but are still unable to access bank financing. In addition, enterprises that have raised meaningful equity and are looking to leverage debt in their capital stack are within our scope.

While our historical experience with mechanisms such as pay for success and development impact bonds has been mixed in terms of performance, it is important, from an impact-perspective, to be open-minded to supporting new transaction types that might emerge at the intersection of public-private financing. These models will be inherently untested and uncertain yet may represent fundamentally new approaches to unlocking large pools of government or philanthropic capital.

While we have avoided active conflict zones, and will continue to do so, there are geographies with high risks for social and political disruptions, currency movements, and other macroeconomic challenges where we can still engage. There will be times to embrace the challenge of these geographies if it means reaching populations that no one else will serve. This may mean taking currency risks where appropriate.