In the five years since writing this post, our world continues to face mounting, intractable problems that demand bigger bets and creative solutions at scale. Program-related investments (PRIs) and impact investments can help foundations leverage dollars to take more risks, innovate and meet evolving challenges beyond traditional constructs. While a great deal has been written about the potential impacts of PRIs—my former post included—given the complexity involved with deploying PRIs, it can be unclear when they may be worth the effort. There are ways to tell when PRIs may be worth the effort as well as some approaches and resources for getting started.

Approaches for getting started

A foundation may determine a PRI is the appropriate tool, but it can be daunting to get started. Below are some approaches for reducing the complexity and risk involved with PRIs:

  1. Work through an intermediary: Direct lending can be risky without appropriate staff members with lending backgrounds. Working through experienced intermediaries—including community foundations, donor-advised funds, community development financial institutions (CDFIs) and loan/venture funds—can be a great option to outsource expertise, capacity, and risk. One approach is to make a direct grant to the intermediary who then deploys the PRI. The funds would be recycled at the intermediary for a foundation’s future use. When working through intermediaries, foundations should do their due diligence to ensure the intermediary’s objectives are aligned with the foundation’s and that they have the expertise, relationships, and track record of lending with a clear model for repayment.
  2. Collaborate with other funders: Another great option is working with other interested funders to diligence an opportunity jointly and reduce costs on the front end. In this approach, foundations should still involve their individual legal teams in the diligence process.
  3. Hire an outside consultant: If resources allow, hiring an external consultant with expertise in PRIs can be a great way to get customized support from where to get started and understanding how PRIs complement a foundation’s existing portfolio and goals, to more robust sourcing, diligence, and underwriting support. Contact NCFP for consultant recommendations.
  4. Connect with peers: Finally, consult with other funders—especially ones with similar asset and staff sizes—to learn from their experiences. When I first worked on a PRI, I reached out to a peer funder who shared valuable perspectives that provided a strong starting point for our team. This advice seems simple, but don’t underestimate the power of connecting and learning from your peers.

Read the full article about PRIs by Mary Ann Weiss at the National Center for Family Philanthropy.