Impact Capital at a Crossroads
A letter by Jacqueline Novogratz on the state of impact capital
It’s been a quarter century since we started Acumen, when “social investing” was barely a whisper.
Assets labeled “impact capital” now measure in the trillions. Development finance institutions have expanded their mandates. Family offices and institutional asset managers speak fluently about ESG, blended finance, and additionality. And as traditional aid retreats, a widening circle of global actors — the UN, multilaterals, NGOs, philanthropists, governments — are adopting impact-investment approaches, often without the structures, skills, or system-building experience this work demands.
What were fringe experiments when Acumen began — impact investing, venture philanthropy, blended finance — are now mainstream. The sector has grown up. But it has also never been at greater risk of drifting from its purpose.
“The impact ecosystem has never been at greater risk of drifting from its purpose.”
The evidence is in where the capital isn’t. In too many of the places where poverty is deepest and climate shocks are most severe, capital still does not flow at the speed or scale required. The people who have long been overlooked and underestimated are being left further behind. That is why I believe we need a reckoning.
The question is not whether markets can be made to work for people living in poverty. We know they can. The question is whether we have the courage to design them that way — deploying every effective tool at our disposal, being honest about trade-offs, and building toward a more human-centered capitalism. How we answer will go a long way toward determining whether the billions living in poverty today will have access to work, opportunity, and dignified lives. That we answer has never been more important.
How we got here
The first era of impact capital had less to do with investing at scale and more to do with experimentation. We marveled at how small amounts of philanthropy combined with business acumen and patient investment strategies could result in outsized impact. In 2012, the Monitor Group partnered with Acumen to produce “From Blueprint to Scale,” a report that both acknowledged challenges and created new language for the social sector. It coined the term “impact-first funds” and reinforced the need for grants to make companies more investment-ready. As the report warned: “Because the work of preparing market demand and supply may not produce sufficient private financial return within five to ten years, if ever, a dependence on return-seeking capital alone may come up short.” It also outlined structural challenges: high transaction costs and small, complex deals; lack of enabling infrastructure; and, critically, insufficient absorptive capacity for capital in developing markets — especially when creating new markets for low-income people. All of this underscored the essential role of philanthropy in building markets that serve the poor.
Acumen was among the first to put that theory into practice, using first-loss capital to crowd in commercial investors and pairing it with technical assistance at the company level. What we called “enterprise philanthropy” is now the architecture mainstream impact investors call blended finance.
“Philanthropy is not peripheral to any of this. It is the catalytic first dollar that unlocks everything else.”
These ideas caught on and led to an institutional era where large foundations, development finance institutions, and asset managers joined the field in force. Capital seeking impact opportunities scaled more quickly than investable opportunities could be found. Many impact investors gravitated toward more developed markets with proven businesses and more advanced capital ecosystems, leaving exciting, impactful opportunities in developing economies underfunded.
The decline of traditional aid has led to a surge in investment-based approaches to solving our problems. With it have come more accountability, a focus on sustainability, and genuine growth when it works. Yet many new players are launching investment vehicles without first acquiring the tools, experience, and networks required to create impact or generate returns. Investing in undercapitalized, underserved communities demands patience, urgency, skill, and deep local knowledge and connections. And already, too many investors are falling into the trap of chasing financial returns while letting impact fall by the wayside.
What we’ve learned
In fragile economies, where customers earn only a few dollars a day and climate and currency shocks are constant, the assumption that deep impact and high financial returns can coexist everywhere has proven unrealistic, time and again. Investing for impact is harder. It has to be if we’re honest about the economics of serving people on the margins.
Acumen’s Patient Capital portfolio, which is backed by philanthropy, bears this out. Our financial returns are below what traditional VCs promise. Of more than 200 companies we’ve supported, only Esusu — an Acumen America investment whose mission is to dismantle barriers to housing and close the racial wealth gap — has achieved unicorn status in conventional terms. We’re not ashamed of our numbers, for they reflect the hard decisions we made in service of impact. And we know that financial returns and company valuation alone do not capture lives in poverty impacted or whether important new industries were created.
Between the two sides of our investing work — our nearly $200 million in philanthropic Patient Capital deployed to date, and Acumen Capital Partners, our for-profit management company, which currently manages more than $300 million — our companies have reached nearly 800 million people with goods and services, created or improved nearly a million jobs, and built new markets, like off-grid solar, where they had never existed. Our philanthropic Patient Capital investments have leveraged five to six times in follow-on capital (our commercial funds have catalyzed even more).
When capital enters low-income markets demanding returns the economics cannot support, we are closing the doors of opportunity in the places that need us most. We’ve watched companies across sectors — off-grid solar, health care, clean cookstoves — on powerful impact trajectories stumble because impact investors and institutional investors feared downturns, market volatility, or rough patches, and pulled out at the point where change was possible.
At the same time, development finance institutions and multilaterals, responding to accountability pressures, have become increasingly process-heavy — more safeguards, more reporting layers, more approvals, less risk-taking, less transparency — until the machinery slows capital to a crawl. All of this is happening at a moment when social enterprises are being asked to do more than ever before. Leaders in the financial sector understand this, but often feel trapped by shareholder expectations and misunderstandings of risk. Meanwhile, great ideas and strong teams stall, the poor fall further behind and systems grow more fragile.
Capital is in abundance. Courage is scarce.
There are billions of dollars seeking “impact.” Yet too much of it flows toward safe bets and markets already on the cusp of profitability. The places that most need risk-tolerant, Patient Capital remain woefully underfunded. One example is the vast share of climate finance flowing to mitigation while adaptation — the work of helping communities survive the climate shocks already here — remains sorely underfunded.
Impact-first investing costs more
We cannot move forward effectively without first being honest about the trade-offs.
A company serving smallholder farmers who are earning $3 a day, or bringing off-grid solar to remote communities in fragile states, will not consistently deliver venture-style returns. If it claims to, someone or something is being squeezed — customers, workers, or long-term financial sustainability — or the claim is simply false.
Impact-first investing costs more, especially if you’re building new markets for underserved people, and you get more for it: resilience instead of fragility, dignity instead of extraction, systems that can weather climate shocks and political instability rather than collapse at the first downturn.
If these markets delivered market-rate returns, the proposition would be simple, and organizations like Acumen would have little role to play. But the reality of building energy markets in Zambia and Sierra Leone, or financing clean cookstoves across East Africa, calls for something more complex — and more honest.
All the financial tools at our disposal
The most challenging markets require the full spectrum of capital: philanthropy, concessional debt, public finance, guarantees, carbon credits, and commercial investment. No single type of capital can do this alone. And capital alone isn’t the constraint; the instruments for deploying it in the hardest places are still too slow and too bespoke, with transaction costs that eat into small checks. Impact investors need simpler, more elegant instruments.
The growing range of financial instruments — from blended-finance vehicles to currency hedging to debt-for-nature swaps — reflects a sector beginning to grapple with what this work actually takes.
Debt-for-nature swaps are restructuring sovereign debt in countries like Belize and Ecuador, freeing up hundreds of millions of dollars for marine and forest conservation. In Colombia, Amazonía Emprende, an Acumen investee, is developing biodiversity credits from the restoration of degraded Amazon land, creating income for Indigenous and local communities in the process.
Acumen’s own Hardest-to-Reach Initiative invested $2 million in the solar company Yellow Malawi using a unique blended-currency loan that shields the company from the exchange-rate swings typically associated with dollar-denominated debt. By indexing the loan to the Malawian kwacha — through strategic partnerships with TCX and a guarantee by the European Commission — Yellow could sustainably expand its clean energy and smartphone distribution without passing additional costs to rural customers. When there were no dollars in the country to complete the currency conversion, we turned to the Norwegian Agency for Development Cooperation, whose technical-assistance grant we repurposed to pay Acumen in dollars, allowing Yellow to hold its kwacha and honor its local obligations. (The kwacha inventory sitting in-country has since seeded the beginnings of a local reuse market with less e-waste.) Each layer was necessary, and as a result, 200,000 low-income people in Malawi have electricity. These financial innovations demonstrate how blended finance can absorb risk and unlock dignity and opportunity even in the most fragile markets.
The wrong question on subsidies
The full spectrum of capital also means subsidies. I continue to be amazed by the trope that subsidies distort markets for the poor, without the recognition that thriving economies have always deployed subsidies strategically to build critical industries, from the tax credits that launched the U.S. renewable energy sector to the industrial policies that built manufacturing powerhouses in East Asia.
Subsidies in areas like clean cooking are no different. Clean cooking delivers enormous public benefits — reduced deforestation, lower emissions, better health for the 2.5 billion people who still rely on harmful cooking fuels — but relies on rural household purchasing power. Subsidies are needed: through government, through philanthropy, or through mechanisms like carbon finance that put nature on the balance sheet and price pollution honestly.
The question should not be simply about subsidy but about smart subsidy. Yes, bad subsidy creates dependence. And we can subsidize the wrong things: fossil-fuel subsidies globally run into the hundreds of billions annually. Smart subsidy unlocks long-term possibility.
Philanthropy is the risk-taking catalyst
Philanthropy is not peripheral to any of this. It is the catalytic first dollar that enables everything else. Without it, we would not have an off-grid solar sector that has now reached hundreds of millions of people across Africa and South Asia. Our Hardest-to-Reach Initiative — a $250 million blended-finance vehicle expanding off-grid solar in Somalia, Malawi, Zambia, Sierra Leone, Burkina Faso, Burundi, the Democratic Republic of Congo and beyond — was anchored by philanthropy, as well as first-loss capital from the Green Climate Fund, which brought in other institutional investors and a commercial bank.
That catalytic capital absorbs early risk, funds structuring costs and enables institutional investors to participate. It meant Acumen was able to close its first investment in Somalia, into a pioneering microfinance institution called KIMS. Not long after, the International Finance Corporation announced its own investment in KIMS, and two other institutions may follow suit. First moves matter.
In a moment when traditional aid is contracting, catalytic philanthropy — risk-taking, patient, unrestricted and potent — makes more sense than ever.
Rethinking risk for outsized impact
If the first era of impact capital was pioneering and the second institutional, the next must be defined by systems change.
In an era of chasing scale, maximizing returns, demanding quick exits and retreating from ESG commitments, investing for impact in the hardest markets can feel countercultural. It requires a willingness to sit with complexity, accept concessions when the problem demands them and measure success not only by financial metrics but by whether systems are strengthened and dignity expanded.
“The question is not whether markets can be made to work for people living in poverty. We know they can. The question is whether we have the courage to design them that way.”
For philanthropists, courage means going first — recognizing the outsized potential of catalytic risk. For development finance institutions and multilaterals, it means following what some are already doing, streamlining processes, sharing due diligence, partnering more deeply with local leaders, and sharpening reporting protocols. Reporting requirements have multiplied faster than learning, slowing the movement of capital to the builders on the ground. Entrepreneurs and grantees spend too much time measuring and demonstrating impact instead of creating it. What’s needed is speed, trust in capable local actors, and a clearer focus on outcomes over process.
For impact investors, it means being clear-eyed about the real risks, returns, and impact of investing in the lowest-income communities.
For new entrants — the NGOs, government agencies and family offices turning to investment models — courage means building the skills, relationships and local knowledge this work demands and finding values-aligned partners, rather than defaulting to partners whose values and expectations may be mismatched to the communities they aim to serve.
In entrepreneurship we trust
Yet, despite the steep challenges, I am more convinced than ever that change is possible, because I have lived it.
I have accompanied entrepreneurs in fragile markets as they extend their shop hours because solar light gives them agency. I have watched farmers in post-conflict Colombia rebuild soil and income through Patient Capital, and seen blended-finance structures unlock investment that once seemed unimaginable. I’ve had a front-row seat to a solar sector that began with a single light and has grown into an entire ecosystem reaching hundreds of millions of people.
What it takes is entrepreneurs with the resilience and grit to stay the course and the moral imagination to see the world as it is — and as it could be. These social entrepreneurs are working against extraordinary odds. They are today’s superheroes and need capital that matches their bravery.
The next chapter will not be written by those chasing certainty, quick wins or ideological purity. It will be written by those willing to sit with complexity, say out loud what is and isn’t working, and keep building anyway.
Future generations will not judge us by how much capital we labeled “impact.” They will ask whether our capital actually reached the people and places where it mattered most — and whether we were honest and brave enough to design it that way.
Sincerely, 
Jacqueline Novogratz,
Founder & CEO, Acumen
May 6, 2026
More about Jacqueline Novogratz
Jacqueline Novagratz is a trailblazing social innovator and best-selling author whose work has inspired people around the world and taken impact investing from a fringe concept to a mainstream phenomenon.