The Kresge Foundation today announced a $2 million investment through its Social Investment Practice in Living Cities’ newly launched Blended Catalyst Fund, a $31 million impact investing debt fund that will test innovative approaches to solving urban problems.

The Blended Catalyst Fund combines philanthropic and commercial debt under the premise that both types of capital are needed to support initiatives that achieve better results for low-income people in U.S. cities.

Kresge is one of 10 philanthropic and commercial investors in the Fund. Kresge’s Social Investment Practice uses financial tools including debt, equity, guarantees and deposits to make investments that further the foundation’s mission and programmatic priorities. The foundation began exploring these tools in 2007, but to date has made social-investment budget and spending decisions on an annual basis.

“In 2015, Kresge made a $350 million commitment to social investing, and this is one example of that commitment in action,” said Kimberlee Cornet, Kresge’s managing director of the Social Investment Practice. “We know the problems vexing urban areas are too complex to solve with grant dollars alone. Funds like this bring additional capital to bear and allow for organizations to innovate and test new solutions.”

The Blended Catalyst Fund invests repayable capital in urban initiatives that deliver measurable impact. The Fund will provide term loans, lines of credit and equity investments at below-market rates to organizations, both for-profit and non-profit, and local governments that are focused on economic development, income inequality, small business development, homelessness and similar social issues. Currently, additional fund investors are Annie E. Casey Foundation, Deutsche Bank, Ford Foundation, John D. and Catherine T. MacArthur Foundation, MetLife Insurance, Prudential Financial, Robert Wood Johnson Foundation, The San Francisco Foundation and Surdna Foundation. 

“The genesis of the Blended Catalyst Fund came from our learnings about the need for more efficient ways to attract, blend and deploy capital,” said Eileen Neely, Director of Capital Innovation at Living Cities. “We set up the Blended Catalyst Fund to advance our goals beyond the dollars that grants can supply, because repayable capital unlocks significantly more resources available to accelerate, scale or replicate investment efforts.”

Current and anticipated loans or investments include:

• Denver Pay for Success: The Blended Catalyst Fund made a $500,000 loan to Denver PFS LLC, which provides funding for permanent housing and supportive services to chronically homeless individuals across Denver. For more information, see press release.
• Detroit New Economy Initiative Fund: The Blended Catalyst Fund will make a $1 million loan to the New Economy Initiative Fund, a Community Foundation of Southeast Michigan program, which will make loans to entrepreneurs and small businesses in and around Detroit who are currently shutout from the mainstream market.  
• Impact Ventures III: The Blended Catalyst Fund made a $2 million equity investment in City Light’s Impact Ventures III fund, which invests in mission-based entrepreneurs focused on education, safety and the environment.
• Regional Equitable Development Initiative Fund: The Blended Catalyst Fund plans to make a $3.5 million loan to the Regional Equitable Development Initiative Fund which will provide early stage financing to create quality, affordable housing near transit to connect low-income residents with jobs, schools, and services in the greater Seattle region. 
• Urban Innovation Fund: The Blended Catalyst Fund expects to make a $500,000 equity investment in the Urban Innovation Fund, which provides capital and guidance to early-stage social entrepreneurs solving critical urban challenges.

Through its loans and equity investments to organizations, the Blended Catalyst Fund provides investors with a platform to innovate, collaborate and share learnings to achieve the greatest impact for low-income communities. By pooling their resources, investors unlock capital to test innovative solutions to urban challenges.

Investor commitments to the Blended Catalyst Fund are expected to grow to $40 million by fund close.

The Kresge Foundation is a $3.6 billion private, national foundation that works to expand opportunities in America’s cities through grantmaking and social investing in arts and culture, education, environment, health, human services, and community development in Detroit. In 2015, the Board of Trustees approved 370 grants totaling $125.2 million, and nine social investment commitments totaling $20.3 million. For more information, visit kresge.org.

About Living Cities

For 25 years, Living Cities has harnessed the collective power of 22 of the world’s largest foundations and financial institutions to develop and scale new approaches for creating opportunities for low-income people and improving the cities where they live. Its investments, research, networks, and convenings catalyze fresh thinking and combine support for innovative, local approaches with real-time sharing of learning to accelerate adoption in more places. Living Cities Capital Innovation team blends public, private, and philanthropic financial resources in new ways to better meet the needs of cities and improve the lives of low-income people.  Additional information can be found at www.livingcities.org.