About this report

GoodWolf Partners authored this report to support the definition and development of a more active catalytic capital market in Australia. Commissioned by the Paul Ramsay Foundation (PRF), the resource has been developed as an Australian reference point for trusts and foundations, investors, intermediaries, and government actors. It follows the PRF ‘Total Impact Approach’, which considers all the ways a foundation can use its assets to create impact beyond traditional grant-making. The report is informed by international research and grounded in the Australian context through local consultation and surveys.

Key terms

The report defines several concepts essential to understanding the field. Additionality is the additional impact achieved because of the presence of an impact investor that would not otherwise have occurred. Blended finance occurs when an impact-led organisation is provided with more than one type of capital at once, such as a grant and a loan. Concessionary capital accepts lower returns relative to conventional requirements. Other key mechanisms include first-loss positions, designed to absorb losses before other investors are affected, and patient capital, which offers long-term loans or equity on soft terms.

Executive summary

Australia possesses one of the world’s largest private wealth markets, with superannuation assets exceeding $3.5 trillion. Despite this wealth, much of the capital remains misaligned with social and environmental challenges. Globally, the financing gap to achieve the UN Sustainable Development Goals (SDGs) is growing and estimated at US$4 trillion annually. In Australia, a small subset of participants has allocated at least $100 million over the last three years to catalytic capital deals. There is an urgent need for this capital in underserved sectors like affordable housing, where the required 47,000 homes per year far exceeds current government targets.

Case for catalytic capital

The case for catalytic capital is grounded in the scale of unmet investment. While traditional forms of public and philanthropic funding remain essential, they are only a fraction of what is needed. Market-rate investment often leaves behind opportunities involving uncertain outcomes, limited track records, or high transaction costs. Catalytic capital is particularly relevant for opportunities that are early-stage, complex, or community-led. For First Nations communities, this capital can strengthen self-determination and economic sovereignty by positioning organisations as principals in the capital relationship rather than just recipients.

Defining catalytic capital

Catalytic capital is defined as debt, equity, guarantees, and other investments that accept disproportionate risk or concessionary returns to generate positive impact and enable third-party investment. Sector experts identify ‘special ingredients’ including additionality, flexibility, and a role in systems change. The market remains nascent; the $100 million allocated by philanthropic members represents less than 1% of the total portfolio of the Foundations Group for Impact Investing (FGII). If just 5% of these assets were allocated, an upside of $750 million would be realised. The ‘Five P’s’ model describes the specific risk or concession built into structures: Price, Pledge, Position, Patience, and Purpose.

Deploying and using catalytic capital

Catalytic capital can seed early-stage models, support scaling, or sustain organisations where the market does not fully pay for social value. Survey findings indicate that ‘helping to build a track record’ (95%) and ‘leveraging additional investment’ (65%) are its primary roles. Case studies illustrate horizontal and vertical structures. For example, the Clean Slate Clinic utilized sequenced capital for seeding and scaling, while the Ngardara Solar Microgrid Project used a vertical stack of support to build Australia’s first Indigenous-owned utility-scale microgrid. The Lighthouse Foundation used sustaining capital to protect critical services during an organisational transition.

Investor roles

Investor roles are complementary rather than interchangeable. Philanthropic investors are often well-placed to move first, combining catalytic capital with capability-building grants. Government and development agencies shape markets through policy architecture and subsidies. For instance, the Department of Foreign Affairs and Trade (DFAT) manages the Australian Development Investments (ADI) programme to mobilise private sector investment in the Indo-Pacific. Institutional investors follow once risk has been reduced. Primary barriers to deployment identified by survey respondents include internal policies and mandates (45%) and a lack of suitable investment opportunities (41%).

Enabling catalytic capital in Australia

Enablers for catalytic capital reflect the broader conditions needed for a healthy impact investing market. This includes trusted intermediaries, credible impact measurement, and strong government participation. Key initiatives include the Commonwealth Outcomes Fund and the Queensland Treasury’s Social Enterprise and Impact Investing Roadmap. The report recommends establishing a national impact investing wholesaler, Social Capital Australia, to connect capital with high-impact opportunities at scale. Such an entity would help reduce perceived risk and crowd in private capital over time.

Conclusion

Catalytic capital plays a specific role by doing what conventional capital cannot do alone: taking early risk, offering flexibility, and proving new models. In Australia, while capital has started to flow, there is a need to move from isolated examples to a concerted market-building effort. This transition requires clearer language, stronger case studies, and more confident investment committees. Ultimately, the next step for Australia is not simply more capital, but better matched capital deployed with clearer intent and a shared understanding of its purpose.