Executive Summary

NYCEEC, a nonprofit lender, is one of the most recent financial intermediaries to obtain a credit guarantee from the Community Investment Guarantee Pool (CIGP). This guarantee will allow NYCEEC to increase its lending to support clean energy infrastructure within low-income and disadvantaged communities while managing its credit risk. This guarantee program represents an innovative way that philanthropies can support nonprofit and other mission-driven organizations like NYCEEC in their community lending efforts.

About CIGP

The Community Investment Guarantee Pool (CIGP) is a financing tool that enables community development investments in low-income and disadvantaged communities. Managed by Locus, a cohort of 17 philanthropies have committed financial guarantees to unlock private capital and accelerate community investments that may not happen otherwise. The three key areas of community development that CIGP targets are climate, affordable housing, and small businesses. NYCEEC loans finance projects with positive environmental attributes, and the majority of these loans support low-income and disadvantaged communities (e.g., affordable housing).

By pooling together capital from investors, CIGP mitigates risk borne by any individual philanthropy by sharing the loss pro-rata across the pool of guarantors. As risk is reduced, this should encourage other guarantors to join the pool and leverage their balance sheets through guarantees. Part of the vision of CIGP is to demonstrate the potential impact of a self-sustaining guarantee facility, so sharing the risk of these transactions is critical to guarantor participation.

For intermediary lenders in the program, CIGP unlocks a centralized source of credit enhancement and builds capacity for increased community investments. With additional credit enhancement, the intermediaries can explore innovative and expanded investment opportunities they may not have otherwise pursued.

NYCEEC as an Intermediary

In August 2024, NYCEEC was approved as an Intermediary by CIGP. NYCEEC and the CIGP team collaborated to find terms and conditions of the guarantee that would work for both parties, exemplifying the flexibility of the CIGP program.

With the CIGP Guarantee backing qualifying transactions, NYCEEC can seek additional capital funding with more confidence and less risk to all parties. In the case of a loss on guaranteed loans in the NYCEEC portfolio, NYCEEC will take a first-loss position up to $1,500,000. After that, CIGP takes a second loss position in an amount equal to the lesser of 20% of the total dollar amount of the eligible enrolled Qualifying Commitments, or $4,000,000. In other words, if NYCEEC were to originate $21,500,000 of qualifying loans, its credit risk exposure would be limited to $17,500,000 (i.e., 20% of $21,500,000 less $1,500,000). In any case, a single claim cannot exceed $2,000,000 on one Qualifying Loss, which mitigates CIGP risk and incentivizes NYCEEC to maintain a diversified loan portfolio.

Eligible projects under the Guarantee can be retrofits for existing buildings or new construction/substantial rehabilitation. All eligible projects must be in multifamily residential buildings, and 80% of the loans must benefit low- to moderate-income communities. At least 50% of all housing units covered under the Guarantee must target LMI households (which make up to 80% of area median income).

All loan proceeds must finance acquisition and/or eligible predevelopment costs, such as architectural and engineering services, environmental assessments, and permitting. Measures within these scopes include but are not limited to building electrification, solar PV systems, geothermal or other clean energy sources, and various energy efficiency measures.

Case Study: Silverleaf Predevelopment Loan

In November of 2024, NYCEEC closed an approximately $664,000 predevelopment loan for the electrification of permanently affordable, supportive multifamily housing in the Bronx. The Borrower is affiliated with a small nonprofit dedicated to supporting formerly homeless New Yorkers and those who have recently aged out of foster care. 

The project and loan are eligible under the CIGP Guarantee, which will reduce potential credit losses if the loan cannot be repaid. Knowing that the project would be eligible under CIGP gave NYCEEC more confidence in providing a loan to the Borrower. NYCEEC’s predevelopment loan allowed the Borrower to pay for upfront costs and essential predevelopment expenses they could not otherwise afford. This is a prime example of philanthropic guarantees catalyzing impactful community change.

While prudent risk management is important to financial intermediaries, risk must be balanced with mission-aligned impact. If NYCEEC were unwilling to take reasonable credit risks, it may be unwilling to make as many impactful investments. On the other hand, if NYCEEC only makes risky investments to borrowers without any credit risk mitigation, the risk of a loss increases, and NYCEEC may have trouble securing capital. The CIGP Guarantee provides a tool to increase impact while mitigating credit risk to NYCEEC.

Bolstering Community Lenders

At a time when the green banking industry is experiencing significant growth, guarantees are crucial to unlocking even more capital for nonprofits, cities, and small businesses. As an alternative to philanthropic grants, by pooling guarantees from multiple philanthropies and using those funds to guarantee new programs and products, beneficiaries can make a more significant impact with their resources.

CIGP allows smaller community lenders, which are often better positioned to deploy funds directly to disadvantaged communities but may lack the financial resources and credit strength of larger lenders, to increase the scale of their community investment. CIGP should improve the financial strength of these smaller lenders and provide a greater sense of confidence for their investors.

NYCEEC sends its appreciation to Locus, CIGP, and 17 contributing philanthropies for supporting community investments and local economic development. We hope to see additional guarantee facilities and credit enhancements deployed into the communities that need them the most.