Program Related Investing

19 Dec 2011, written by
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Public and private foundations traditionally follow similar models when it comes to investing and distributing their funds.  Assets are, for the most part, invested for return in standard financial instruments such as publicly traded equities and bonds using national markets such as those found on Wall Street in New York.  The returns are then distributed to support charitable works.  In the case of community foundations, those distributions are in the form of grants to local nonprofit organizations for local community projects.

Times however are changing.  National securities markets are faltering, interest rates hover near zero, returns on public equities are often negative and government’s ability to handle the big local infrastructure projects has been stopped in its tracks with plummeting tax revenues.

The result is a downward spiral that has compromised nonprofits and foundations from achieving even modest project goals and that combined with government funds drying up are leaving local communities with nowhere to turn.  In fact, local governments are increasingly applying to foundations for grant funding to facilitate public projects and programs.

A possible solution may lie in the concept of Program Related Investing (PRIs) in which foundations invest some of their assets (for modest or no earnings return) in local community infrastructure projects.  As opposed to philanthropic grants PRI investments would be made under terms that returned at least the principal over a defined period of time.  PRI investment opportunities would, at a minimum, be evaluated to insure the return of principal and backed with tangible assets to ensure satisfactory return in the case of default.

The power of PRIs as an option for community foundations is evident in the following factors:

  • Invested assets stay and circulate in the local community ting the project and boosting the local economy.
  • Use of invested assets and project progress can be monitored in a timely and direct manner.
  • Risk assessment can be more comprehensive and can be adjusted in a timely manner.
  • Investment evaluation and management creates local jobs.
  • Rapid mitigation is possible for changes and exigencies to preserve the project and investment.

PRIs could be structured in a variety of ways including direct investments, purchase of bonds, direct loans or indirectly through the establishment of a nonprofit community financial institution such as a cooperative or community bank.

PRIs are sometimes termed “Mission Related Investing” reflecting the concept that investing in local programs are often directly related to the foundation’s core mission and thereby using its assets to further the fundamental goals of the organization.

You may want to read more about Program Related Investments at one of the following web sites:

Or Google: “Program Related Investments” or “Mission Related Investments”

If you are interested in working on or investing in a Community Foundation effort to explore the development of a local PRI program please call the office at (360) 378-1001 or email at info@sjicf.org and ask for the executive team and mention your interest in PRIs.

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