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Mission-Related Investing

Mission-related investing is considered the “practice of utilizing financial investments to achieve a foundation’s mission.” Two examples of mission-related investing are socially responsible investments and program-related investments.

Socially responsible investing (SRI) is a type of investment strategy that takes into consideration the financial and the social/environmental performance of a corporation or fund – both the quantitative (revenues, cost of sales, margins, ratios) and the qualitative (type of management team, management practices). For foundations, socially responsible investing can be used to help achieve philanthropic goals. Components of SRIs include:

  • screening – the stated inclusion or exclusion of corporate securities in investment portfolios based on social or environmental criteria, such as environmental record, labor relations, and product safety;
  • social venture capital – providing capital and management assistance to companies creating innovative solutions to social and environmental problems;
  • shareholder advocacy – using the shareholder process (dialogue with management and the filing of shareholder resolutions) to advocate for socially responsible changes in corporate policies; and
  • community investment – investing in community development banks, credit unions, loan funds or microenterprise lenders to support development initiatives in low-income communities.

Program-related investments (PRIs) are made by foundations to help further their charitable missions. Often structured as loans, PRIs can be considered equity investments, direct loans, loan guarantees, and nonrecoverable grants.

Foundations often use PRIs to fund requests outside their grantmaking guidelines, such as supplying capital for construction, land acquisition, equipment and furnishings. With program-related investments, a foundation can offer funds at below market and commercial loan rates. Once the principal is repaid by the grantee, the foundation must distribute those funds again, either through new grants or additional PRIs.

Health funders have used PRIs to help establish community health clinics and support other capital projects. The Rhode Island Foundation acquired the Neighborhood Health Plan of Rhode Island through a PRI in order to strengthen health care delivery in the state. As part of its initiative, Practice Sights: State Primary Care Development Strategies, The Robert Wood Johnson Foundation provided states with PRIs to help them create loan funds for capital projects to increase the availability of health care in underserved areas.

 

Resources

Grantmakers In Health, Guide to Impact Investing (Washington, DC: 2011).

Baxter, Christie I., Program-Related Investments: A Technical Manual for Foundations (Indianapolis, IN: Wiley Publishing, 1997). This book provides foundations with guidelines for evaluating PRIs, monitoring grant recipients, and tracking returned funds. Available at http://www.wiley.com/WileyCDA/

Bianchi, Alessandra, “The Other 95 Percent: How a Community Foundation Uses Proxy Voting to Advance its MissionStanford Social Innovation Review, Winter 2005. Available at http://www.ssireview.org/images/articles/2005WI_Whatworks_Proxyvoting.pdf

Brody, Francie, Kevin McQueen, Christa Velazquez, et al., “Current Practices in Program Related Investing: Should You Consider a PRI?NFG Reports 11(4):1-10, Fall 2004.

Cooch, Sarah and Mark Kramer, Compounding Impact: Mission Investing by US Foundations (FSG - Social Impact Advisors: Boston, MA 2007). This report provides an analysis of mission investing by U.S. foundations. Available at http://www.fsg-impact.org/app/content/ideas/item/485

Emerson, Jed, “Where Money Meets MissionStanford Social Innovation Review, Summer 2003. Available at http://blendedvalue.org/media/pdf-money-meets-mission.pdf

The Foundation Center, The PRI Directory: Charitable Loans and Other Program-Related Investments by Foundations (New York, NY: 2003). This directory lists leading PRI providers and includes tips on how to seek out and manage PRIs. Available at http://foundationcenter.org/marketplace/catalog/product_directory.jhtml?id=prod10021

GrantCraft, Program-Related Investing: Skills and Strategies for New PRI Funders (New York, NY: The Ford Foundation, 2006). In this guide, grantmakers explain the process of making PRIs, from explaining the concept to a foundation’s board to structuring and finalizing an agreement. Available at http://www.grantcraft.org/pdfs/pri_guide.pdf

F.B. Heron Foundation, “Mission Stewardship: Aligning Programs, Investments, and Administration to Achieve Impact” (New York, NY: 2006).

Isaacs, Stephen L. and James R. Knickman, eds., “Inside the Foundation: Program-Related InvestmentsTo Improve Health and Health Care Volume V (Princeton, NJ: Robert Wood Johnson Foundation, 2003). Available at http://www.rwjf.org/files/publications/books/2002/chapter_10.html

Jessie Smith Noyes Foundation, “Jessie Smith Noyes Foundation Investment Policy.”

The David and Lucile Packard Foundation, Using All Our Resources: The Packard Foundation’s Program-Related Investment History and Portfolio (Los Altos, CA: 2004). Available at http://www.packard.org/assets/files/capacity%20building%20and%20phil/program%20related%20investments/pri_history_and_successes.pdf

PRI Makers is an association of grantmakers who use program-related and other investments to accomplish their philanthropic goals. Its mission is to provide a forum for networking, professional development, collaboration and outreach to funders, including those not currently making PRIs or other social investments. http://primakers.net/home

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