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Program-Related Investments: A Powerful Tool for Social Change


Every day, we see the successes and setbacks of individuals and organizations working to bring about positive social change. However, many groups are held back from truly making an impact because they don’t have access to sufficient capital and resources. Program-related investments (PRIs) provide a powerful tool for these organizations to fund mission-oriented projects that can be difficult or impossible to support through traditional financing avenues like grants and donations.

They offer tax benefits while assuring investors that their funds are being put towards causes they believe in. In this blog post, we’ll explore exactly what program-related investments entail, how they differ from other forms of investing—and why PRIs should be part of your investment portfolio.


What Is a Program-Related Investment?

A Program-Related Investment (PRI) is an investment to achieve a social or charitable purpose, typically made by a foundation or charitable organization. Unlike traditional grants, PRIs are expected to generate financial returns while still aligning with the organization’s charitable mission.

PRIs are a type of funding that can be received by nonprofit organizations or businesses that are focused on achieving a particular social or environmental objective. The investment can be in the form of loans, equity investments, or guarantees and may have flexible terms like longer repayment periods or lower interest rates than regular financing. This flexibility can make the project more appealing to investors.

PRIs are a tool that foundations and charitable organizations can use to maximize the effects of their assets and advance the causes they support. They are typically employed with conventional grants and other philanthropic methods to develop a more holistic strategy for achieving social and environmental progress.

How Can Program-Related Investments Support Social Change?

Program-Related Investments (PRIs) can support social change in several ways:

  1. Access to capital: Social and environmental organizations and projects can benefit from PRIs, which offer critical funding when they struggle to obtain traditional financing. PRIs can provide the necessary capital for such organizations to achieve their goals.
  2. Leveraging additional funding: Receiving a PRI can increase the chances of getting more funding from other sources. This is because foundations and investors are more likely to invest in a project that has already received a PRI, resulting in a multiplier effect.
  3. Flexibility: PRI financing can provide organizations and projects with greater flexibility, such as offering lower interest rates or longer repayment periods, compared to traditional financing. This can ease the financial burden and enable them to concentrate more on their social mission.
  4. Risk-taking: Investing in projects that may not guarantee a financial return, PRIs enable foundations and charitable organizations to support innovative solutions to social and environmental problems by taking risks in their investments.
  5. Sustainable revenue streams: Investing in renewable energy projects through PRIs can generate ongoing revenue that organizations and projects can utilize to advance their social mission. This revenue stream is obtained from selling the energy generated by the project.

Potential Challenges of PRIs:

While Program-Related Investments (PRIs) offer many potential benefits for supporting social change, there are also some challenges associated with them:

  • Risk: Assessing the likelihood of a return on investment can be difficult for PRIs in projects or organizations considered high-risk or untested.
  • Impact measurement: It can be difficult to measure the impact of a PRI, particularly if the project or organization is working towards social or environmental goals that are hard to measure.
  • Legal restrictions: The investing organization must comply with legal restrictions when providing PRIs, which means they must use the funding to support their charitable mission. As a result, PRI funding may not be available for all types of projects or organizations.
  • Capital constraints: Charitable organizations and foundations might struggle to fund every organization or project seeking support due to limited available capital for PRIs.
  • Exit strategy: Exiting a PRI investment can be more challenging than traditional investments. In case the project or the organization fails to deliver as per expectations, it can be tough to recover the investment.
  • Lack of awareness: Organizations may have difficulty identifying and applying for PRI funding opportunities due to a potential lack of awareness and understanding about PRIs among potential recipients of funding.

Despite their effectiveness, investors should carefully evaluate the potential risks and challenges associated with investing in PRIs before using them to support social change.

Examples of Successful PRIs:

Many successful Program-Related Investments (PRIs) have been made by foundations and charitable organizations over the years. Here are some notable examples:

  1. The Bill and Melinda Gates Foundation has provided financial support to various global health initiatives through Program Related Investments (PRIs). One such investment includes a loan of $52 million to the Global Alliance for Vaccines and Immunization (GAVI) to facilitate the creation and dissemination of vaccines in regions with low income.
  2. In 2016, the Kresge Foundation contributed $30 million as a PRI for the progress of the Woodward Corridor in Detroit, Michigan. The investment was beneficial in financing affordable housing, commercial development, and enhancing public infrastructure.
  3. In 2012, the David and Lucile Packard Foundation invested in the Ivanpah Solar Electric Generating System in California through a PRI. The investment was used to build a 392 MW solar power plant, which is currently the world’s largest solar thermal power project.
  4. The Skoll Foundation has supported social entrepreneurship by making several PRIs. One example of this is a $2 million loan provided to Kiva, a microfinance organization that assists entrepreneurs in developing countries with loans.
  5. In 2015, the Surdna Foundation provided a $3.5 million PRI to aid in the growth of worker cooperatives in low-income communities. This investment facilitated the establishment of the Fund for Democratic Communities, which delivers funding and technical support to cooperatives.

Many other foundations and charitable organizations have made successful PRIs like these, supporting various social and environmental causes.

To Sum Up:

Program-related investments have emerged as a powerful tool for social change. They allow foundations to invest in projects and businesses that may not be bankable yet benefit their mission and advance their philanthropic goals. Their impact can develop over time and achieve greater success if supported by a long-term strategy. PRIs also allow foundations to collaborate with nonprofit partners, the government, and the private sector, creating a unique opportunity to leverage resources and advance the overall mission. Through exploring different options available through PRIs, foundations can use this approach to effectively make real change happen by having an effective mechanism for anticipating challenges and responding quickly. As these tools attract more attention within the foundation world, they will continue to become more prevalent in enabling greater social impact in times of crisis and beyond.

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