Additionality

Written By Anjali Deshmukh

Prime’s additionality standard for catalytic investing

At Prime, we define investor additionality—also known as investor contribution—as an attribute of impact for an investor, where the change in outcome resulting from the investment likely would not have happened without the investor’s participation. 

Most investors may exhibit some level of additionality, depending on how you look at what would have happened otherwise. But we set a clear minimum standard to separate charitable catalytic investors from others. This standard helps prevent impact-washing and safeguards the appropriate use of charitable catalytic capital.

 

Financial Additionality: The Minimum Standard

Prime believes that charitable catalytic investors must demonstrate financial additionality, which means they bridge capital gaps for impactful opportunities by providing capital or terms that conventional investors likely would not. 

  • Identifying the capital gap, where an investment opportunity faces a shortage of appropriate capital, caused by either:

    • Actual deviation from market norms (e.g., lower-than-market-rate return expectations, higher risk or costs, longer timeframe for liquidity); or

    • Perceived deviation stemming from investor biases or limited knowledge of the investment area.

  • Acting where conventional investors won’t, taking action to address the capital gap,  such as:

    • Providing capital that sufficiently addresses the gap

    • Offering capital on more patient, flexible, or lower-cost terms

 

Additionality in Practice at Prime

Financial additionality is a core component of Prime’s catalytic investing programs.

  • For Prime Impact Fund, we assessed financial additionality by:

    • Gathering expert input on the likely behaviors of conventional investors

    • Analyzing the specific circumstances of each investment round

  • For Prime-Facilitated investments, we assess financial additionality by:

    • Gathering information about the investment strategy and market conditions being addressed to establish the capital gap

    • Evaluating whether the investment approach demonstrates financial additionality.text goes here

 

Why This Matters

The ultimate purpose of charitable catalytic investing is to correct failures in conventional markets that leave scalable, high-impact opportunities stranded without the capital they need to succeed. To be truly catalytic means:

  • Deploying capital where conventional investors won’t

  • Accepting risks that conventional investors avoid

  • Structuring investments to maximize impact instead of investor return

This kind of investing is not easy. It takes courage to step into markets others avoid, to hold the line on mission when conventional capital veers toward safety, and to resist the urge to follow the crowd. Charitable catalytic investors operate differently by design—challenging norms, absorbing risk, and prioritizing impact over return. It requires conviction to stay the course when the path forward is uncertain and support is scarce. At Prime, this is how we steward charitable capital—with rigor, integrity, and a clear focus on advancing untapped climate solutions.

 

Case Study

Featured
Catalyzing Climate Solutions: Prime Coalition’s Pursuit of Additionality

Catalyzing Climate Solutions: Prime Coalition’s Pursuit of Additionality

How can catalytic investors ensure their dollars generate impact that wouldn’t occur otherwise? Impact Frontier’s new case study highlights how a focus on additionality has allowed Prime Coalition to advance untapped climate solutions since 2014. The case study outlines Prime’s approach to additionality both in theory and practice, covering the full lifecycle of catalytic investing programs—from establishing additionality in program design, to assessing it during investment diligence, and sustaining it post-investment.

 

Have questions about Additionality? Email Jenny Zhang, Assistant Director, Impact at jenny@primecoalition.org to learn more.

Anjali Deshmukh
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