DeBoskey: Program-Related Investments a key tool for impact investors
Program-Related Investments (PRIs) are an interesting tool that allows you to use the assets in your Donor-Advised Fund for more than just making grants. Read the interesting article by Bruce DeBoskey below for more information.
Increasingly, charitable donors are interested in “impact investing” with their philanthropically committed capital. They seek more creative ways to align their investments with their missions.
Earlier this year, in ” All investing is impact investing,” I discussed the growing recognition that grants and investments can generate both financial returns and social impact. In this column, I expand on this popular topic.
In the Tax Reform Act of 1969, the Internal Revenue Code permitted a giving vehicle for foundations called Program-Related Investments, or PRIs. A PRI is a method of making capital available to both nonprofits and for-profits that are addressing social or environmental concerns.
PRIs can be part of an integrated strategy, along with grants, to achieve the mission. PRIs differ from grants in an important way. A grant is a “social investment” that produces a negative financial return to the donor. With a PRI, a foundation lends money to, or invests in, a nonprofit or for-profit in a way that furthers the mission and actually provides a financial return to the foundation. Although PRIs are still relatively uncommon, the Ford Foundation and others have been using them successfully for years.
Detailed proposed regulations that clarify and expand the definition of PRIs were issued in 2012 and should be finalized later this year.