Giving Compass' Take:

• Stanford Social Innovation Review examines the field of impact investment and argues that charitable causes must be the first priority before making money. That's where program-related investments (PRIs) come in.

• These "mission-driven financial tools" are most valuable for smaller foundations to test out ideas and support entrepreneurs in the social space. What can we do to shift more resources toward them?

• Here's how investing in people directly supports programs.

Impact investing, or the idea of making money and doing good, is going mainstream and investors of all types are jumping into the marketplace — including foundations. But while some of the largest foundations have led the charge on impact investing, the movement is leaving many behind.

While all forms of impact investing can be used to increase a foundation’s impact, we believe program-related investments (PRIs) are a particularly underutilized tool for small and mid-sized family foundations.

PRIs must have charitable intent as their primary purpose, with financial returns as a secondary goal. PRIs are the only ones that have a clear definition from the IRS and the only one that enables private foundations to make investments outside the typical rules regarding prudent investing. But unlike traditional investments, advancing the foundation’s mission must be their foremost purpose, and to drive impact, they often are made on concessionary terms that are not aligned with the level of risk the investor is taking on.

PRIs are unique and valuable, mission-driven financial tools that small and mid-size foundations can use alongside their grantmaking to support social entrepreneurs, prove new business models, catalyze additional investment, and recycle donor dollars to achieve greater impact.

Read the source article about program-related impact investing by Stacey Faella and Margaret Gifford at Stanford Social Innovation Review.