efore 2025, catalytic capital was a relatively niche but growing practice within the social impact sector. But for anyone following this year’s conversations at the UNGA, IMF–World Bank Annual Meetings, World Economic Forum, COP30, and on Devex and other development platforms in the Global North and South, it is clearly now an essential part of a broader strategy to address drastic cuts to overseas development assistance (ODA).
For development practitioners, especially those championing systems thinking and locally led development, this heightened focus on catalytic capital offers a chance to move beyond compliance–driven donor–grantee relationships that governed past development initiatives, producing rigid program designs that could constrain innovation, flexibility, and impact. For investors, especially those with nowhere to hide in overvalued developed equity markets, it offers a chance to tap the contextual knowledge of last–mile populations and the technical expertise of development practitioners, producing more rigorous market research and risk analysis as they search for upside in frontier and emerging markets. Yet decades of development practice show that investments in these contexts need more than entrepreneurship and technical know–how to succeed. They also require optimism. And in the face of uncertainty and geopolitical and technological change, a mindset of patient optimism can help drive catalytic capital as a viable long–term complement or alternative to ODA.
Even with heightened focus, catalytic capital will continue to face headwinds. Grounded in blended finance—a marriage between concessional and commercial capital, with the former de–risking the latter—it brings together two markedly distinct cultures. The former is the slower–paced realm of development practitioners, rich in grassroots, community engagement savvy but limited in its familiarity with equity risk premium, credit spread, or margin debt. The latter is the faster–paced realm of investors, equipped with deep market savvy but limited in its understanding of participatory rural appraisals, conflict mitigation, and other tools for earning the trust of communities—trust that is key for navigating local context and correctly assessing investment risk. As with all relationships, this one requires compromise. But too much compromise and aversion to risk and patience will dilute blended finance structures to the point that they yield weak financial returns for investors and limited social impact for communities. With development practitioners scrambling to address a funding crisis, and investors—ever mindful of opportunity costs—seeking quick returns, the risk of over–compromise to make a deal—any deal—with only tacit approval of communities is constant.
In this 2025 context, Peter Drucker, the late father of modern management, might remind us that “the greatest danger in times of turbulence is not the turbulence, it is to act with yesterday’s logic.” To avoid this trap, development practitioners and investors can adopt patient optimism as their governing principle, embracing a startup mindset in which both share real skin in the game. Investors accept the possibility of loss or weak returns, while development practitioners—no longer buoyed by donor–sponsored overheads—accept nonpayment for poor results. This is not to say social impact organizations do not merit core funding. It just acknowledges that—because philanthropic, bilateral, and multilateral funding is severely and increasingly limited—core funding should be reserved only for organizations most in need. Other funding can be catalytic.
Deploying catalytic capital in this way, like any development or start–up effort, is hard. It is not for everyone, particularly those seeking safe and quick returns through prescribed implementation plans. Patient optimists take the leap anyway. They embrace the abstract. Why? Because they are in it to achieve sustainable impact alongside durable financial returns, knowing that patient capital, optimism, and trust in the iterative process are what it takes to find the right way forward. They bring the time, flexibility, curiosity, and perseverance needed to build trust with communities, co–structure community–led deals, and course correct—believing their collective effort and commitment to finding viable, financeable solutions will eventually pay off. This governing principle of patient optimism enables all parties to navigate the fog together with a common purpose: equitably sharing the benefits of economic growth while shaping the future of global development.
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Patient optimism: A governing principle for impact investing
Photo by Zosia Szopka on Unsplash.
December 4, 2025
Impact investing now demands patient optimism, a mindset uniting development practitioners and investors to deploy catalytic capital more effectively amid shrinking overseas development assistance and rising global uncertainty, writes Craig Grunwald.
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efore 2025, catalytic capital was a relatively niche but growing practice within the social impact sector. But for anyone following this year’s conversations at the UNGA, IMF–World Bank Annual Meetings, World Economic Forum, COP30, and on Devex and other development platforms in the Global North and South, it is clearly now an essential part of a broader strategy to address drastic cuts to overseas development assistance (ODA).
For development practitioners, especially those championing systems thinking and locally led development, this heightened focus on catalytic capital offers a chance to move beyond compliance–driven donor–grantee relationships that governed past development initiatives, producing rigid program designs that could constrain innovation, flexibility, and impact. For investors, especially those with nowhere to hide in overvalued developed equity markets, it offers a chance to tap the contextual knowledge of last–mile populations and the technical expertise of development practitioners, producing more rigorous market research and risk analysis as they search for upside in frontier and emerging markets. Yet decades of development practice show that investments in these contexts need more than entrepreneurship and technical know–how to succeed. They also require optimism. And in the face of uncertainty and geopolitical and technological change, a mindset of patient optimism can help drive catalytic capital as a viable long–term complement or alternative to ODA.
Even with heightened focus, catalytic capital will continue to face headwinds. Grounded in blended finance—a marriage between concessional and commercial capital, with the former de–risking the latter—it brings together two markedly distinct cultures. The former is the slower–paced realm of development practitioners, rich in grassroots, community engagement savvy but limited in its familiarity with equity risk premium, credit spread, or margin debt. The latter is the faster–paced realm of investors, equipped with deep market savvy but limited in its understanding of participatory rural appraisals, conflict mitigation, and other tools for earning the trust of communities—trust that is key for navigating local context and correctly assessing investment risk. As with all relationships, this one requires compromise. But too much compromise and aversion to risk and patience will dilute blended finance structures to the point that they yield weak financial returns for investors and limited social impact for communities. With development practitioners scrambling to address a funding crisis, and investors—ever mindful of opportunity costs—seeking quick returns, the risk of over–compromise to make a deal—any deal—with only tacit approval of communities is constant.
In this 2025 context, Peter Drucker, the late father of modern management, might remind us that “the greatest danger in times of turbulence is not the turbulence, it is to act with yesterday’s logic.” To avoid this trap, development practitioners and investors can adopt patient optimism as their governing principle, embracing a startup mindset in which both share real skin in the game. Investors accept the possibility of loss or weak returns, while development practitioners—no longer buoyed by donor–sponsored overheads—accept nonpayment for poor results. This is not to say social impact organizations do not merit core funding. It just acknowledges that—because philanthropic, bilateral, and multilateral funding is severely and increasingly limited—core funding should be reserved only for organizations most in need. Other funding can be catalytic.
Deploying catalytic capital in this way, like any development or start–up effort, is hard. It is not for everyone, particularly those seeking safe and quick returns through prescribed implementation plans. Patient optimists take the leap anyway. They embrace the abstract. Why? Because they are in it to achieve sustainable impact alongside durable financial returns, knowing that patient capital, optimism, and trust in the iterative process are what it takes to find the right way forward. They bring the time, flexibility, curiosity, and perseverance needed to build trust with communities, co–structure community–led deals, and course correct—believing their collective effort and commitment to finding viable, financeable solutions will eventually pay off. This governing principle of patient optimism enables all parties to navigate the fog together with a common purpose: equitably sharing the benefits of economic growth while shaping the future of global development.
