What is a program-related investment?
A charitable foundation’s grantmaking and other program work are funded by investment returns on its endowment; the foundation’s board has a fiduciary duty to invest the endowment prudently. A “program-related investment” is one made in support of the foundation’s mission interests (in our case, artistic vitality and land conservation), in which case we can ethically accept lower-than-normal financial gains or higher-than-normal financial risk. Some examples of this sort of work include making a loan to a non-profit organization, serving as guarantor of a loan, funding a revolving fund, or placing endowment funds with a bank which makes below-market loans to non-profits.
Program-related investments (PRIs) are investments made by foundations to support charitable activities that involve the potential return of capital within an established time frame. PRIs include financing methods commonly associated with banks or other private investors, such as loans, loan guarantees, linked deposits, and even equity investments in charitable organizations or in commercial ventures for charitable purposes. Characteristics of PRIs and PRI-making include the following: • Of the many thousands of grantmaking foundations in the United States, only a few hundred make PRIs. In addition, relatively few PRI funders maintain formal PRI programs or make PRIs on an annual basis (about one out of three). • Foundations make PRIs to further some aspect of their charitable mission (e.g., in the areas in which they make grants). PRIs are often made to organizations with an established relationship with the grantmaker. • Foundations commonly make PRIs as a supplement to their existin
A program-related investment (PRI) is a tool foundations can use to leverage their philanthropic dollars. Unlike grants, however, foundations get a return on their investment, through either repayment or return on equity. PRIs give charitable organizations or commercial ventures access to needed capital, typically at favorable terms. In return, the funder benefits in several ways: • It is often able to recycle PRI payments for subsequent charitable investments. • The foundation is generally able to count PRIs toward its minimum five percent payout of net assets. • PRIs allow foundations of every type and size to have greater programmatic impact.
