Foundations are uniquely positioned to play a catalytic role in expanding access to finance for organizations that further their missions. They can do this by investing directly in projects and organizations, or by providing financial guarantees that help those organizations gain access to financial from other investors or lenders. If you are a foundation professional or want to become one, your expertise in the social sector offers greater insight into the business models of your grantees, and positions you to leverage this knowledge—alongside your foundation’s financial resources—to bring mainstream financiers into the space. Guarantees have several attractive features for foundations. They: may have greater impact than a direct one-time loan or investment, as they can open up new sources of financing and build the credit-worthiness of grantees. may not necessarily require an upfront outlay of funds, meaning those resources can do “double duty” by also being invested elsewhere and earning a financial return. Learn more about what it takes to provide and structure guarantees. Join this webinar to hear the Global Impact Investing Network (GIIN) present findings and recommendations from recently published research on the use of guarantees in community investing in the U.S. The GIIN will be joined by Tracy Kartye of the Annie E. Casey Foundation, a foundation professional with experience using guarantees, who will shed light on the tool through a case example. The speakers will then field questions from the audience.

1. CATALYTIC CAPITAL – USING GUARANTEES
TO UNLOCK PRIVATE CAPITAL FOR IMPACT
EPIP Webinar
August 2, 2017
EPIP Host: Biz Ghormley
Presenters:
Hannah Schiff, Tracy Kartye

2. 2
Emerging Practitioners in
Philanthropy (EPIP) is a
national network of
foundation professionals,
social entrepreneurs and
other change makers who
strive for excellence in the
practice of philanthropy.

3. 3
We provide a platform
for our community to:
Connect
with others
Learn &
practice
leadership skills
Inspire
emerging ideas in
the social sector

4. Get in touch!
Please reach out with any questions or to
learn more about membership!
Biz Ghormley
biz@epip.org
Director of Operations & Member Services

5. What’s Next?
• Next EPIP Webinar!
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6. Housekeeping
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7. Speakers
Hannah Schiff, Global Impact Investor Network (GIIN)
Tracy Kartye, The Annie E. Casey Foundation

8. 1
Using Guarantees to Expand Impact
Hannah Schiff
Research Manager

9. 2
The Global Impact Inves2ng Network
The GIIN is a nonprofit organiza5on dedicated to
increasing the scale and effec5veness of impact
inves5ng around the world.
To help accelerate the development of a coherent
impact inves?ng industry, the GIIN:
• Builds cri?cal market infrastructure
• Supports educa?on and industry research
• Convenes an investor community.

10. 3
Defini2on of impact investments
Impact investments are investments made in
companies, organiza5ons, projects, or funds with
the inten5on to generate a posi5ve social or
environmental impact alongside a financial return.
Core characteris?cs of impact inves?ng:
• Inten?onality
• Investment generates financial return on capital
• Range of return expecta?ons and asset classes
• Impact measurement by investor and/or investment manager

11. 4
A diverse market

12. 5
2013 2017

13. 6
What is a guarantee?
?
Bank Nonprofit housing developer

14. 7
What is a guarantee?
Bank Nonprofit housing developer

15. 8
Why use guarantees?
• Address real and perceived risks to draw more capital into
impacRul projects and organiza?ons
• Enable investors to gain experience with unfamiliar sectors
or business models
• Facilitate access to capital for nonprofits or community
development organiza?ons at favorable terms

16. 9
Where have guarantees been used?
Impact themes addressed by number of guarantees
n = 58 guarantees; some guarantees target mul1ple themes

17. 10
Evidence of limited uptake and scale
• Most guarantees are
small – under $5 million.
• Most projects or funds
they back are small –
under $50 million
• Most guarantees are
nego?ated at the loan or
fund level (not
programma?c).
Guarantees by size
n = 46 guarantees

18. 11
Wide variety of structures
• Percentage of losses covered ranges from <10% to 100%
• Can include full, par?al, or no up-front funding
• Triggers and access to capital vary
Guarantees by coverage level and funding
n = 44 guarantees

19. 12
Example 1: Healthy Neighborhoods
• Two $40 million loan pools for
below-market-rate mortgages
and renova?on in Bal?more.
• Unfunded guarantee from 3
founda?ons and the Maryland
Housing Fund covered 10% top
loss per loan.
• Guarantee enabled lower
interest rates and higher loan-
to-value ra?o.
• 352 loans totaling $53.6 million
originated from the two pools.

20. 13
Example 2: Collabora2ve for Healthy
Communi2es
• Two CDFIs began lending in a new
sector – Federally Qualified Health
Centers.
• $5 million unfunded guarantee
from the Kresge Founda?on on
ini?al pool of $25 million.
• Later enabled further capital raise,
more than doubling the amount
of capital.
• Enabled CDFIs to gain experience
with FQHCs and demonstrate
their creditworthiness.

21. 14
Thank you!
hschiff@thegiin.org
www.thegiin.org/knowledge-center

22. 1
Catalytic
Capital –
Using
Guarantees to
Unlock Private
Capital for

23. 2
The Annie E. Casey Foundation
Overview
• Established in 1948 by Founder of UPS
• Mission: Build brighter futures for all children in
the US
• Social Investments one of our philanthropic tools
– Complements grantmaking
– 4% target allocation of the endowment
– Place based and thematic investments

24. Impact Inves,ng
MRIs
PRIs
Traditional
Grants
Traditional
Market Returns
Expected
Below Market
$ Return
Significant
Impact Return
Market
$ Return
Intentional
impact return
Market
Return
Social factors
considered
RETURN
ES
G
Conventional
Investments
Socially
Responsible
Investing
• Screening
• Shareholder
Advocacy
VEHICLE
Adapted from document provided by The John D. and Catherine T. Macarthur Foundation
Impact Investing – Foundation Assets
Do no harm
Investor
interest
expressed
-100%
$ Return
Traditional impact
returns expected

25. Impact Investing Across Asset Classes
Mission Related Investments
(Market-Rate)
Program Related Investments
(Below-Market Rate)
Equity
Subordinated
Loans
PrivateEquity
New Frontiers in Mission-Related Investing, F.B. Heron Foundation, 2004

26. 5
Portfolio Highlights
($ in millions)
Cumulative
Commitments
Co-
investments
/ Leverage
PRIs $63 $603
Strategic PRIs $78 $244
MRIs $11 $636
Deposits $9 --
Total $161 $1,483
Guarantees $64 $137
Access to
Capital
Economic
Development
Education
Child Welfare
Childcare
Housing &
Community
Development
SI Program Alignment
Based on Gross Commitments (Millions)
Total Assets Committed (Gross):
$105,850,779

27. 6
Investment
• 3 NMTC transactions totaling $50M+
• Guaranty provided by Casey
• Netted EBDI more than $13M in equity
Results
• $35M in new infrastructure
• Successful relocation of 742 households
• New office and housing construction
• New public school campus
• Retail amenities
Example: East Baltimore New Markets Tax Credits
Mission: Revitalize, re-energize and rebuild the East Baltimore
neighborhood

28. 7
Investment
• 90% guaranty of $750,000 loan
• Bridge government contract negotiations
• Guaranty reduced over time
Results
• Served 2,300 clients with 4,500 children
• Diverted ~ 50% of kids from foster care
• Shortened foster care stays to less than 5 months (average is 11.5 months)
Example: Center for Family Representation
Mission: keep families together by providing families in crisis free
legal assistance and social work services

29. 8
Casey Approach to Guarantees
• Seek to structure investments to facilitate achievement of
impact and financial return objectives
• More efficiently utilize Foundation resources
– Unfunded guarantees support positive impact while Foundation
earns market rate return on invested assets
– Charge nominal fee for use of balance sheet
• Leverage more resources than possible through grant funds
– $1M Healthy Neighborhoods guarantee raised more outside capital
than $25,000 first loss grant
• De-risks transactions enabling organizations to demonstrate
creditworthiness

30. 9
Lessons Learned
• Open communication is critical
– Guarantors, investors, and recipients of capital need to have a common
objective and understand rationale, barriers and investment parameters
of one another
• Underwriting is key to understanding risk and likelihood of
financial loss
– Recoverability of payouts can be time consuming and expensive or even
completely unrealistic
• Be clear about loss tolerance and how payouts will be handled
– If not willing to take a loss on a guaranty, should not provide it
– Guaranty does not have to mean a 100% loss rate

31. Developing solutions to build a brighter future for children, families and communities
www.aecf.org