At the Clinton Global Initiative (CGI) Annual Meeting today, Seth Waugh, CEO of Deutsche Bank Americas, participated in the announcement of Deutsche Bank’s commitment to the structuring of the Essential Capital Fund. The announcement immediately followed President Obama’s address at the event. The Fund defines an innovative approach to providing early stage high risk capital to support the impact investing sector.
The social finance/impact investment sector holds great promise in enabling private capital to be used towards the goal of addressing societal challenges. Its potential for growth, however, has been constrained by a scarcity of vehicles to efficiently provide investment capital. A critical missing element in the establishment of a robust impact investment marketplace is the uptake of the higher risk “first loss” capital that can leverage the participation of socially motivated, but cautious, capital providers.
Approximately $50 million in size, the Fund is a pioneering structure that will address this market failure by creating a credit enhancement facility that can be readily accessed by social enterprises and social impact funds around the world to help mitigate perceived risks of early stage enterprises. The Fund is being structured and managed by Deutsche Bank, with the intention of attracting mission driven investor interest from development banks, foundations and others who are committed to growing the scale and pace of the impact investment market. The Fund uses innovative tools to self-generate the first loss capital for the Essential Capital Fund itself.
“Deutsche Bank has used its social financing expertise, investment banking skills, business resources and worldwide relationships to create financial instruments and funds that benefit social enterprises. We are fully committed to realizing the Essential Capital Fund, which represents a pioneering effort in the impact investing field,” said Seth Waugh, CEO of Deutsche Bank Americas.