Guarantee Pool Deploys Over $7M in its First Year
Innovative use of philanthropic balance sheets unlocks new community development capital
This month, we take a look back at the Community Investment Guarantee Pool (CIGP) and its year in review. Communities and stakeholders across the United States experienced a tumultuous 2020, a challenge CIGP answered with the deployment of multiple guarantees for impact in its target sectors while continuing to build capacity and internal infrastructure. Read on for a summary of the Pool's accomplishments to date and a preview of plans for the year ahead.
RICHMOND, V.A. – December 17, 2020 – The Community Investment Guarantee Pool (CIGP), a program of LOCUS Impact Investing, has deployed $7.1M in guarantees since 11 philanthropies founded the Pool in December 2019. Providing a central depository of philanthropic guarantees, the Pool allows qualified beneficiaries to access multiple philanthropic balance sheets in one place while providing flexible guarantee terms to meet the specific needs of guarantee-users. This year, three Community Development Financial Institutions (CDFIs) utilized CIGP guarantees to support the development and preservation of affordable housing.
CIGP’s first guarantee for $1.5M went to Genesis LA to bolster financing of public-supported supportive housing and naturally-occurring affordable housing in LA County, CA. “We’ve been specifically targeting new developments that can be built without relying on tax credits, as well as the acquisition of existing ‘naturally’ affordable housing that has lower rents but lacks covenants to preserve affordability,” Genesis LA President & CEO Tom De Simone said. “To make these projects work, we are extending more flexible financing to fill gaps and account for the fact that these projects are not leveraging the conventional equity financing from tax credits. CIGP has been critical to our ability to not only provide such financing, but to do so on a larger scale than we could otherwise do.”
CIGP has also provided a $2M guarantee to Low Income Investment Fund (LIIF) to support a $20M fund that will provide liquidity to affordable housing developers who have been adversely impacted by the COVID-19 pandemic. This funding will fill gaps created when fees are stalled in phases of LIHTC development, allowing critically needed affordable housing projects throughout the United States to continue despite pandemic-related headwinds.
Local Initiatives Support Corporation (LISC) will be using a $3.6M guarantee for their $36M Diverse Developer Loan Fund to provide loans for minority-owned or -led developers with limited balance sheets. These loans will help them conduct pre-development, acquisition, and construction of affordable housing projects throughout the United States.
With a robust pipeline of additional affordable housing opportunities, as well as use cases for small business and climate, CIGP looks forward to accelerating its deployment of guarantees in 2021, and interested parties are invited to reach out to discuss if a guarantee can be a helpful tool for unlocking new capital. Additionally, CIGP is establishing Finance Advisory Teams in each of its three focus areas (affordable housing, small business, and climate) to convene national thought leaders and identify opportunities for guarantees to address current financial gaps. This will help ensure the Pool is maximizing its impact and truly unlocking capital that would otherwise not flow to community development projects.
A collection of both funders with national scope (e.g., The Kresge Foundation, The Annie E. Casey Foundation) as well as local and regional funders (e.g., The California Endowment, Seattle Community Foundation) founded CIGP in order to mobilize more community development capital in low-income communities and communities of color. For these funders, CIGP allows for risk sharing with other institutions while also providing back office infrastructure and an opportunity to learn how to leverage their balance sheets in new ways. This increases the diversity of thought and allows for philanthropies of varying size and scope to have equal power in shaping the direction of the Pool while learning how guarantees can unlock capital in the communities they care about. To support this learning journey, CIGP is launching a five-year evaluation effort to understand the impact of the Pool and regularly incorporate lessons learned to improve the Pool’s performance.
Since CIGP’s launch in December 2019, The Robert Wood Johnson Foundation (RWJF) has joined as a guarantor, bringing the total number of philanthropic guarantors to 12. Additionally, the Rockefeller Foundation has provided operating support, and The Hewlett Foundation and Wells Fargo Foundation have provided programmatic support for specific sectors (climate and affordable housing, respectively). Kimberlee Cornett, RWJF director of impact investments and chair of the Guarantor Advisory Council, says, “In 2020, we’ve seen low-income communities face health and economic challenges previously unimagined and the severity and complexity of the challenges requires new solutions. I believe CIGP is one way to activate new resources from foundations and family offices and provide intermediaries with an efficient, reliable source of credit enhancement so they can move quickly in response and take more risk when necessary. As with any new tool, the CIGP model is still being perfected. But this is important work for the field and investors to do together toward our shared goal of delivering more capital to communities.”
Looking ahead, Sarah Stremlau, president of LOCUS Impact Investing, says, “This is an exciting time for CIGP. Our early successes confirm there is a need here, and we are on a learning journey to determine how we can best meet that need. As we grow the Pool, establish our Finance Advisory Teams, and refine our internal processes, I believe we will create a powerful resource for mobilizing capital in new ways.”
2021 holds a lot of promise for CIGP. Conversations are already underway with philanthropies interested in joining the Pool as new guarantors and there is a robust pipeline of guarantee use cases in all three sectors. As the evaluation begins and the Finance Advisory Teams begin to meet, CIGP will continue to hone its ability to mobilize capital where it has been previously painfully absent.
To join in CIGP’s mission as a funder or a guarantee user, or to simply learn more, please visit www.guaranteepool.org.
Community Investment Guarantee Pool (CIGP) is a financing tool formed in December 2019 by a dozen impact investing organizations to create a pooled commitment of financial guarantees for intermediaries involved in affordable housing, small business, and climate lending. CIGP accelerates community investments by leveraging balance sheets for impact to make more and new types of community development transactions feasible. The initial guarantors that helped make CIGP possible include The Kresge Foundation, The Annie E. Casey Foundation, The California Endowment, Chan Zuckerberg Initiative, CommonSpirit Health, Gary Community Investments, Jessie Ball duPont Fund, Phillips Foundation, Seattle Foundation, Virginia Community Capital and Weingart Foundation. Learn more about CIGP by watching this short video produced by The Kresge Foundation.
About LOCUS Impact Investing
The program manager for CIGP is LOCUS Impact Investing, a national social enterprise launched by Virginia Community Capital (a CDFI) to empower place-focused institutions to invest their capital locally to build prosperous, vibrant communities. LOCUS works with investors, underwriting guarantee commitments as well as monitoring and managing the portfolio for both impact and risk.