Giving Compass' Take:
- This article was originally posted by the Center for High Impact Philanthropy.
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The number of private foundations in the U.S. and the amount of their endowments has grown considerably over the past decade.
However, few foundations actually go further and use social impact investing tools—such as Program Related Investment (PRI) and Mission Related Investment (MRI)—to advance their charitable missions beyond grant making.
In this paper, the reader will find definitions, analyses of Mission Investor Exchange data to outline the current state of the sector, and barriers to the use of mission investing with specific examples.
Social impact investing allows foundations to support their charitable missions beyond just grant making. While charitable grants are rarely repaid, investments in social enterprises have the potential to generate a nancial return for the foundation, thereby boosting the pool of money available for future grants or investments. Both PRIs and MRIs provide some level of financial returns from the social enterprises they invest in. But PRIs and MRIs are characterized and treated di erently by the Internal Revenue Service.
A question to consider is whether there are investable opportunities consistent with the foundation’s mission and programmatic goals. Unfortunately, there is a lack of consistent data to help understand the outcome and investment performance experienced by other foundations in social sectors such as environment, education and health.
Our evolving hypothesis is that signi cant mission investment potential $24 billion if foundations redirected 3% of their endowments—could be unlocked if private foundations had access to superior education services, social and nancial performance data, and a trusted, high-quality intermediary providing inexpensive due diligence, structuring and underwriting. The next phase of this work is to test the hypothesis that implementing such actions to address the barriers will indeed unlock latent demand for PRIs and MRIs by private foundations.
Successfully building one or all of these capabilities at an academic institution has the potential to create powerful enablers for broader and deeper mission investing, accelerate positive social impact and recycle significant amounts of philanthropic capital.