The Kresge Foundation has announced the launch of a guarantee pool for community development investments aimed at catalyzing more than $150 million in capital for small businesses, climate infrastructure, and affordable housing in underresourced communities.
Launched with commitments totaling $33.1 million from nine philanthropic organizations, a community development financial institution, and a healthcare system, the Community Investment Guarantee Pool is the first community development finance vehicle of its kind in the United States. In addition to Kresge, which incubated the pool and has committed an initial $10 million, partners committing guarantees — unfunded commitments from an organization's endowment that offer risk mitigation — include the California Endowment, the Chan Zuckerberg Initiative, CommonSpirit Health, Gary Community Investments, the Jessie Ball duPont Fund, Virginia Community Capital, and the Annie E. Casey, Phillips, Seattle, and Weingart foundations.
The partners hope to secure investor commitments totaling more than $75 million to achieve greater impact across the country, with a focus on California, Colorado, Delaware, Florida, Georgia, Maryland, New Mexico, North Carolina, Texas, Virginia, and the Seattle region. The Rockefeller Foundation also is expected to provide operational support for the pool, with LOCUS Impact Investing, a subsidiary of CDFI Virginia Community Capital, underwriting guarantee commitments as well as monitoring and managing the portfolio for both impact and risk.
In 2017, Kresge commissioned a study by the Global Impact Investing Network about the use of guarantees and found that while many impact investors were interested in guarantees, they did not always have the skills, knowledge, or capacity to take on highly customized transactions.
"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," said LOCUS president Teri Lovelace. "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.