Scaling the Use of Guarantees in U.S. Community Investing

Publication date: 
April, 2017

This report takes an in-depth look into the application, benefits and scalability of financial guarantees in impact investing. It shows how impact investors are using guarantees as a credit-enhancement tool to stimulate increased private-sector investment in solutions to social and environmental problems.

Key findings include:

  • Guarantees are a powerful financial tool that can help channel private capital into impactful deals at the right terms to meet investees’ needs.
  • Guarantees help mitigate risk for certain impact investors, thus enabling greater amounts of capital to reach organizations generating positive social and environmental impact.
  • Guarantees enable investors to gain experience in a new sector, help prove the viability of a business model that generates social impact, or facilitate access to capital at favorable terms for nonprofits.
  • Promising areas for greater use of guarantees include energy efficiency, community-based renewable energy, health care, healthy food access, and expanding small-business lending.
  • The main providers of guarantees in U.S. community investing have been foundations and the lenders gaining protection have been banks.
  • Guarantee use in U.S. community investing has been concentrated in the affordable housing and community real estate sectors.
  • The median size of a guarantee is $2 million and the median fund or project size is $20 million.
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