What if public entities could act more like private impact investors? 

What if public capital could be deployed for measurable social and environmental benefit, positive financial return, and local benefit? 

Could government effectively invest for a triple bottom line?  

Could investment capital support an economic justice agenda? 

These are some of the questions the New York City Economic Development Corporation, or NYCEDC, set out to answer by setting up the NYC Catalyst Fund.

As the organization’s Executive Vice President for Strategic Investments, I lead the team that launched the fund in 2023. A first-of-its-kind, $40 million fund-of-funds, it was designed to generate measurable impact, localized benefits to the people of New York City and financial returns.

Our strategy focuses on three impact pillars: diverse entrepreneurship, community development, and emerging priority sectors for New York City like life sciences, technology and the green economy. The fund aims to advance an economic justice framework that supports all New Yorkers engaging in all parts of the economy.

Public capital drives impact

As of today, the NYC Catalyst Fund has closed investments into 11 private equity and private debt vehicles. The constructed portfolio consists of Afterglow Climate Justice Fund, Antler, Avante Capital Partners, Harlem Capital, HCAP Partners, Maycomb Capital, MetaProp, nvp capital, Open Opportunity Fund, Rethink Education, and Turning Rock Partners, many of which are diverse-led firms that reflect New York City’s own entrepreneurial ecosystem. These experienced investment teams have track records of making commitments to NYC-based companies and supporting companies with impact ingrained in their business models. 

In total, NYCEDC expects our $40 million to catalyze more than $280 million of investment — roughly a 7X multiple — into 140 New York City-based companies.  In addition to generating impact, we also expect the fund to earn real financial returns, delivering an estimated 10% rate of return. In short, we are proving that public capital, if deployed strategically, can be both mission-driven and profitable.

How governments can get started in impact investing

With the NYC Catalyst Fund capital now fully committed, we are taking stock of our experience as municipal impact investors, both to inform our NYC Catalyst Fund II strategy and to share lessons learned with other public entities considering developing their own impact investment funds. These are our recommendations:

First, take a whole portfolio view. For us, not every deal hit all three dimensions of financial performance, impact, and local benefit equally — and that was okay. We approached our goals at the portfolio level, allowing flexibility across individual investments. Some funds promised higher returns but less New York City focus; others had deep, diverse community roots but narrower sector alignment. Balance across the portfolio, not perfection in every deal, was key.

Next, guard against bias in the pipeline. When we launched applications for the fund, we already had a strong network of diversity-focused venture and private equity partners, thanks to existing Venture Access Alliance and Founder Fellowship programs. That network was both a strength and a blind spot: Our first wave of investment proposals from fund managers skewed towards existing relationships. We iterated over time, expanding outreach to ensure we were reaching beyond the usual suspects and tapping the broader impact investing ecosystem.

Third, expedite decision making with the right due diligence tools. Prior to reviewing 155 investment proposals from fund managers across 18 months, our evaluation committee developed a proprietary scorecard — a quantitative tool that assessed each applicant against financial, social and local benefit criteria. Combined with input from an operational due diligence consultant, this scorecard helped us translate qualitative instincts into structured, repeatable and efficient decision-making.

Success factors — and the road ahead

A disciplined, portfolio-driven approach. A diversified and inclusive pipeline. A bespoke due diligence tool. Together, these allowed NYCEDC, a large public entity, to deploy $40 million in public capital toward market-rate returns and measurable impact for New Yorkers.

Now we face an impasse that is familiar to many of our funds’ portfolio companies: We have found product-market fit, and the next step for us is to scale.

Building on the first fund, we have now launched NYC Catalyst Fund II, inviting new investment partners to join us in expanding this model. With this second fund, NYCEDC is expecting to continue delivering the triple bottom line for New Yorkers. But we are also hoping to continue making the case that impact investing should not be confined to private foundations or family offices — it should be a public policy tool.  Under the Mamdani administration, we are bringing a heightened focus to affordability, economic mobility and supporting fund strategies that generate positive outcomes for New Yorkers.  We want to prove that impact investing is an attractive use for public capital, offering opportunities to support catalytic projects while benefiting from long-term value accretion of those same investments.

If you agree and want to be a part of this journey, learn more here. Check out details on the NYC Catalyst Fund II Request for Applications (RFA).

Brinda Ganguly is Executive Vice President of the Strategic Investment Group at the New York City Economic Development Corporation.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.