“Catalytic capital is a subsidy, but a deliberate one. It exists to absorb constraints that institutional investors cannot hold because regulation, ratings, and liquidity rules won’t allow them to. ”
— Yasemin Saltuk Lamy
Catalytic capital is often described as “concessional” capital that accepts lower returns in exchange for impact. But this framing overlooks what matters most.
In practice, catalytic capital does something far more precise: It goes first, takes on early risk, and clears the path for institutional capital to follow within regulatory and rating constraints.
In this episode, we revisit catalytic capital through the experience of Yasemin Saltuk Lamy, now Head of Investment Strategy for Institutional Retirement at Legal & General, and formerly Deputy CIO for Catalyst Strategies at British International Investment.
At BII, Yasemin helped turn an experimental idea into an institutional portfolio. When she stepped into the role, the Catalyst Portfolio was roughly £300 million. By the time she left, it had grown to about £1.6 billion.
But size alone wasn’t what she emphasized most. The harder work was defining what catalytic capital actually does inside a portfolio constrained by real-world rules.
The key insight was this: there was no trade-off between impact and financial return. But there was a trade-off between impact and liquidity. In fact, liquidity is often what limits whether assets can sit on institutional balance sheets.
Rather than treating impact as a “nice to have,” Yasemin and her team treated it as an intrinsic variable. If you ignore it, it doesn’t disappear. It shows up later as risk.
By formally measuring impact alongside risk, return, and liquidity, BII could look at the portfolio as a system rather than a collection of stand-alone deals. Some assets were allowed to be less liquid but highly catalytic, while others were more liquid, without requiring every investment to deliver across all dimensions.
Catalytic capital was the tool that made this possible. Sometimes it meant backing first-time funds or unproven platforms. Other times, it meant taking junior positions so that senior tranches could meet investment-grade requirements and become eligible for insurers or pension funds. This wasn’t charity. Yasemin was clear it only made sense when supported by regulatory or rating constraints.
That experience now informs Yasemin’s work at Legal & General, where she operates from the opposite side of the spectrum, managing long-dated pension liabilities under strict regulatory regimes. From this seat, catalytic capital is often the missing piece that determines whether institutional capital can participate at all.
Allocating capital inside institutions that answer to regulators, rating agencies, and beneficiaries is an exercise in discipline. Every structure has to hold up under scrutiny, and every assumption eventually gets tested by the balance sheet.
That’s what makes this conversation worth revisiting.
It shows how ideas like catalytic capital move from concept to implementation, and how markets actually expand when risk is allocated with intention. For investors trying to understand where capital can go next (and why it hasn’t gone there before), this episode fills in the missing pieces.
Listen to the full episode here.
YouTube episode here.
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Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Castbox, YouTube Music, Amazon Music, or on your favorite podcast platform. You can watch the interview on YouTube here.
What was your favorite quote or lesson from this episode? Please let me know in the comments.
SHOW NOTES:
[00:00] Introduction
[03:02] Building the catalyst portfolio at BII
[06:50] How BII chose sectors through business models
[09:46] The impact vs liquidity trade-off
[11:38] Using impact measurement to guide capital allocation
[16:04] Risk mitigation strategies in emerging markets
[17:12] How catalytic capital attracts institutional investors
[21:46] Why Yasemin moved to Legal & General
[24:46] Inside L&G’s institutional retirement portfolio
[33:39] What it takes to scale impact investing systemically
[36:15] Rapid-fire questions
MORE QUOTES FROM THE INTERVIEWS:
“’Do good without losing money’ was BII’s premise, and it made room for catalytic capital to take risks others couldn’t and crowd in institutional investors. ”
— Yasemin Saltuk Lamy
“We found no trade-off between financial return and impact, but we did find a trade-off between impact and liquidity. ”
— Yasemin Saltuk Lamy
