Key Points

A guarantee instrument is a credit enhancement tool that can enable philanthropies to unlock millions or billions of dollars for societal impact. The Community Investment Guarantee Pool, created in 2019 by a collaboration of philanthropies and allied impact investors, or guarantors, is a novel initiative that uses guarantees to leverage the balance sheets of foundations and other institutional investors for enhancing the credit of intermediaries in the affordable housing, small-business, and climate markets. As the guarantees are unfunded, foundations continue to keep their endowment invested in the conventional market.

This article describes the Community Investment Guarantee Pool, details its theory of change, and shares early challenges and insights related to the underlying theory of change. It discusses investor “but for” contributions; treatment of risk (perceived versus actual), both for the guarantors and intermediary recipients; and adaptations for specific markets.

The pool is using developmental evaluation and emergent learning to surface insights for philanthropic and other impact investors. These insights can inform practices that hone the use of guarantees and a pooled impact investing approach. Foundations will benefit collectively and individually from the pool’s experience as they learn how to best integrate the use of guarantees in their own foundations and initiate other collaborative guarantee pools focused on sectors or geographic regions. Additionally, financial intermediaries can become more familiar with this financial tool and will be able to experiment with innovative and equitable lending and investment decisions with greater confidence due to the guarantee backing and lessons surfaced through a learning community.

Open Access