Competition for catalytic capital is fiercer than ever. We at Magnitude Global Finance (MGF) saw this firsthand earlier this year when reviewing 56 credible proposals from investment managers under the Adaptation Finance Window for Africa (AFWA).
MGF has worked hand-in-hand with IMCA members on AFWA since the beginning. Our market sounding work helped inform the design of the window and ensure it was aligned with market needs. And now we’re supporting the management, selection, and evaluation process for proposals. As part of this, we developed an AFWA Market Insights Dashboard that shares anonymized analytics on the state of adaptation finance in Africa.
One of our core focuses is serving as a translator between private asset managers and donors/DFIs, helping private sector partners navigate an often confusing system and learn from the process. We know that participating in these windows takes time and money, and we want to deliver value back to all applicants – and those who might apply for similar windows in the future. In that spirit, I wanted to distill three major lessons we’ve gleaned from the AFWA process.
1. The “Crowded Room” Problem and the Necessity of Differentiation
When a competitive window like AFWA opens, many asset managers fail to look left and right to see who else is standing in the room and think about what differentiates their strategy.
Data from the AFWA applicant pool reveals a stark reality: the vast majority of proposals were focused on agricultural value chains, with 71% of strategies including some agriculture-related focus. East Africa was also the most common target region, included in 64% of proposals with Kenya appearing as a target country in more than half of those. These trends make sense. Agriculture is the backbone of many African economies and arguably the sector most exposed to climate hazards. It also has clear, durable revenue streams and tested business models. Likewise, many managers are naturally focused on markets where they see the strongest pipeline and execution potential. But from an evaluator’s perspective, if a large share of the pile is focused on agriculture in East Africa, your concept is, by default, going to be benchmarked against many others with similar theses.
Being in a sector facing climate vulnerability is important, but insufficient when the competition is so fierce. To move from the long list of 56 eligible proposals to our final selection, asset managers tended to distinguish themselves across four key dimensions:
- Mobilization Potential: Catalyzing new private capital rather than reshuffling existing commitments and providing detailed plans for unlocking that capital.
- Return Profile: Offering a credible path to risk-adjusted returns that appeal to commercial investors and help the manager eventually outgrow the catalytic crutch.
- Demonstration Effect: Creating a new, pioneering model with the potential to be a replicable blueprint for the wider market.
- Impact Superiority: Addressing specific hazards (e.g., extreme heat, coastal erosion) in the impact thesis and integrating physical climate risk assessment and A&R taxonomies/impact tools into portfolio management.
This impact dimension was especially important given that many applications brought an A&R focus to familiar investment sectors such as agriculture, SME finance, water, infrastructure, financial inclusion, and technology. From an evaluation perspective, the strongest proposals made a clear and credible case that A&R was central to the strategy. They demonstrated integration into the pipeline, portfolio management approach, and use of catalytic capital, rather than treating it as an afterthought.
2. The High Probability of Failure and the “Value in Losing”
The statistical reality of these windows is sobering: for AFWA, we reviewed 56 credible proposals to select only a handful of winners. Any manager entering this process has a high mathematical probability of losing.
However, competitive windows act as a powerful discovery mechanism for catalytic capital providers. Through this process, IMCA members were exposed to a wealth of innovative thinking and high-impact concepts that were previously under the radar.
We are already seeing the exposure effect in action. Proposals that were not selected for the final AFWA shortlist are under consideration for alternative investment or bilateral support from individual IMCA partners. By participating, these managers moved from being “unknown entities” to “stand out innovators” in the eyes of the world’s leading climate finance actors.
3. Understanding the Donor Spectrum: Scale vs. Pioneering
A final, critical lesson for managers: catalytic capital providers are not a monolith. Donors and DFIs operate across a broad spectrum of risk tolerance and strategic priorities.
- On one end of the spectrum: Conservative DFIs often have a strong preference for scale, proven investability, and a clear commercial orientation. They are looking for vehicles that can move significant amounts of capital and demonstrate institutional-grade management.
- On the other end: Certain donors and philanthropies are much more inclined toward risk-taking and first-of-a-kind pioneering models. These partners may be specifically seeking out smaller concepts or highly innovative structures that test new impact theses, even if they lack a long track record.
The takeaway for managers is to avoid a one-size-fits-all pitch. You must evaluate where your investment thesis lies on this spectrum and ensure that your narrative reflects the specific priorities and objectives of the partner you are engaging.
The Takeaway for Managers
For asset managers seeking catalytic funding, the lesson is threefold:
- Know your competition: If you are in a crowded space like agriculture, the burden of proof for differentiation is higher.
- Play the long game: Use the process to showcase your most innovative thinking, as the exposure you’ll gain in the process often paves the way for the next partnership.
- Align with the mandate: Tailor your strategy to the specific financing instruments and risk-appetite of the donor, whether they are seeking massive scale or pioneering innovation.
The motivation behind this blog is both to share reflections and invite conversation. If you participated in AFWA or a similar window and want to compare notes or share thoughts, we’d welcome the conversation and feedback on how to more effectively and efficiently advance our shared sustainable investment objectives.
Isaiah Oliver is a Principal Consultant at MGF, where he advises funders on the design and management of blended finance initiatives. He is the team leader for MGF’s support to IMCA’s Adaptation Finance Window for Africa (AFWA), implemented in partnership with the World Climate Foundation. He previously served as Deputy Team Leader and Head of Partnerships for the Climate Finance for Development Accelerator (CFDA), USAID’s flagship climate finance program.
This is the second in a two-part reflection on lessons from the Adaptation Finance Window for Africa (AFWA). In our previous post, we looked at the donor perspective, outlining the benefits and drawbacks of using open competitions for sourcing and deploying catalytic capital.
