United States Sees Launch of First Guarantee Pool for Community Development Investments

Today, the Com­mu­ni­ty Invest­ment Guar­an­tee Pool (the Pool), a new com­mu­ni­ty devel­op­ment tool and the first of its kind in the Unit­ed States, announced its for­ma­tion. Backed by guar­an­tee com­mit­ments total­ing $33.1 mil­lion from 10 phil­an­thropic orga­ni­za­tions across the Unit­ed States — includ­ing the Bal­ti­more-based Annie E. Casey Foun­da­tion — and a large health care sys­tem, the Pool is expect­ed to cat­alyze more than $150 mil­lion in new com­mu­ni­ty invest­ments in small busi­ness­es, cli­mate and afford­able housing.

Guar­an­tees are unfund­ed com­mit­ments from an organization’s endow­ment that offer risk mitigation.

LOCUS Impact Invest­ing (LOCUS), a sub­sidiary of Vir­ginia Com­mu­ni­ty Cap­i­tal, a non­prof­it com­mu­ni­ty devel­op­ment finan­cial insti­tu­tion with $413 mil­lion in assets under man­age­ment, will serve as the pro­gram man­ag­er work­ing with the investors, under­writ­ing guar­an­tee com­mit­ments as well as mon­i­tor­ing and man­ag­ing the port­fo­lio for both impact and risk.

“Through the tool of guar­an­tees, social­ly moti­vat­ed investors can lever­age their bal­ance sheets with­out requir­ing cur­rent liq­uid­i­ty to cre­ate a back­stop and help min­i­mize risk, allow­ing more tra­di­tion­al cap­i­tal to feel com­fort­able putting their dol­lars into com­mu­ni­ty invest­ments,” LOCUS Pres­i­dent Teri Lovelace said. ​“Using guar­an­tees, the Pool will ensure deep­er com­mu­ni­ty impact, impact that includes diver­si­ty, equi­ty and inclu­sion across small busi­ness, afford­able hous­ing and cli­mate invest­ing. We’re excit­ed to get the first guar­an­tees made and start cap­i­tal flow­ing to meet crit­i­cal com­mu­ni­ty devel­op­ment needs.”

The Kres­ge Foun­da­tion incu­bat­ed the Pool pri­or to its for­mal launch. In 2017, Kres­ge com­mis­sioned a study on the use of guar­an­tees by impact invest­ing and phil­an­thropic orga­ni­za­tions through the Glob­al Impact Invest­ing Net­work. It found that while many orga­ni­za­tions had an inter­est in using guar­an­tees as an addi­tion­al impact invest­ing tool, they did not always have the skills, knowl­edge or capac­i­ty to take on high­ly cus­tomized transactions.

The study and sub­se­quent focus groups revealed a need for an inter­me­di­ary who could cre­ate effi­cien­cies, cen­tral­ize a source of cred­it enhance­ment and accel­er­ate com­mu­ni­ty invest­ments with­out requir­ing cur­rent liquidity.

“The U.S. impact invest­ing field is ready for a tool like this, which makes it eas­i­er for new guar­an­tors to come to the table,” said Rip Rap­son, Kresge’s Pres­i­dent & CEO. ​“Through the Pool, we join our part­ners, notably includ­ing a lead­ing health sys­tem, in putting insti­tu­tion­al endow­ments to work in ways like nev­er before. By col­lec­tive­ly com­mit­ting more than $33 mil­lion in guar­an­tees, we are like­ly to unlock $150 mil­lion or more for invest­ment in new afford­able hous­ing units, for small busi­ness­es to land the seed mon­ey they need to get to work and to allow those com­mu­ni­ties most affect­ed by cli­mate change to access the lead­ing cli­mate mit­i­ga­tion tools.”

Kres­ge made an ini­tial $10 mil­lion com­mit­ment to the Pool. Oth­er investors in the Pool include The Annie E. Casey Foun­da­tion, The Cal­i­for­nia Endow­ment, Chan Zucker­berg Ini­tia­tive, Com­mon­Spir­it Health, Gary Com­mu­ni­ty Invest­ments, Jessie Ball duPont Fund, Phillips Foun­da­tion, Seat­tle Foun­da­tion and Wein­gart Foun­da­tion. The goal is to grow investor com­mit­ments to more than $75 mil­lion for greater impact in under-resourced com­mu­ni­ties across the coun­try. The Rock­e­feller Foun­da­tion is also expect­ed to pro­vide oper­a­tional sup­port for the Pool.

“The Com­mu­ni­ty Invest­ment Guar­an­tee Pool has poten­tial to improve out­comes for chil­dren and fam­i­lies by pro­vid­ing access to sta­ble hous­ing in safe and afford­able homes — as well as small busi­ness­es by pro­vid­ing crit­i­cal resources nec­es­sary to thrive in today’s econ­o­my,” said Lisa Hamil­ton, pres­i­dent and CEO of the Annie E. Casey Foun­da­tion. ​“We believe in this impact invest­ment and are eager to see our com­mu­ni­ties use this resource to build on their inher­ent strengths.”

The Pool will span the Unit­ed States with some geo­graph­ic pref­er­ence giv­en to Cal­i­for­nia, Col­orado, Delaware, Flori­da, Geor­gia, Mary­land, New Mex­i­co, North Car­oli­na, Texas, Vir­ginia and Seat­tle and will deploy the first guar­an­tees lat­er this year.