Program-Related Investments: FAQ

What are Program Related Investments?
Program-related investments, also known as PRIs, leverage limited foundation dollars—most often by providing low-interest loans—to promote mission-related foundation goals. These can be short or long-term loans, and recipients can both be nonprofit and for-profit entities.

*Please note that this is an adaptation of common definitions from other sources.

Why does it matter? Why should I care about it?
Donors and foundations have long struggled for ways to align investments with mission. PRIs are the most common way to do so, being pioneered by, among others, the Ford Foundation in the 1960’s. They represent a way to employ investments as a tool to achieve impact. Arguably, they are the oldest and still most common of the “Mission Investing” tools.

Millenials donors, especially, are looking for ways to diversify beyond traditional grants, caring little for the for-profit vs. nonprofit distinction, and being accustomed to socially-minded businesses.

How does a typical PRI work?
A traditional PRI would be an investment into a nonprofit capital project. For example, a medical nonprofit seeks to build a new clinic to expand its service capacity. The clinic will be sustainable over time through insurance reimbursements. A philanthropic foundation can come in and provide long-term, low-interest loan to the nonprofit to do so, achieving guaranteed, if limited, returns with low risk.

However, PRIs are so diverse that the possibilities are endless, and some of the largest initiatives even have foundations investing in for-profit businesses.

What are examples of PRI?
Here are three interesting examples:

  • Housing: Boston’s Community Economic Development Assistance Corp (CEDAC). CEDAC, a quasi-public entity, finances community development projects in low-income areas of metropolitan Boston. A 10-year, $1.5 million PRI from the Boston Foundation made in 2004 helped create an additional 1125 units of housing for Greater Boston low-income individuals.


  • Environment/Gap Funding: Independence Lake Project. An example of a traditional and highly effective PRI by the David and Lucile Packard Foundation. The lake, a critical source of freshwater for Reno, has long been a key priority for conservation efforts. In 2010, The Nature Conservancy was able to put together an opportunity to purchase lands surrounding the lake from NV Energy.

With promised funding from the State of California delayed, the Packard Foundation stepped in to provide a $5 million low-interest loan, providing key “gap funding” to secure the purchase before the deadline, guaranteeing protection for this critical area.


  • Social Enterprise: Benefit Chicago. Representing the cutting edge of PRIs. This $100 million project is co-invested by the MacArthur Foundation, Calvert Impact Capital (an “impact mutual fund”), the Chicago Community Trust and its many donor-advised funds. The funding supports “social enterprises,” both nonprofits and for-profits.

This “patient capital” helps strengthen Chicago’s already vibrant entrepreneurial environment, filling the gap for what other early investors do not typically engage in. So far, the fund has invested in minority-owned startups, companies employing formerly incarcerated individuals, and even an “urban farm,” alongside more traditional recipients.


What’s the entry point in terms of financial commitment?
While most PRI projects tend to be at least $100k or more, the individual investor does not have to commit the whole amount. Many PRIs are collaborative investments, with participation by foundations, government, financial institutions, and donor-advised funds, among others. There is thus no real “entry point.”

What are the risks?
There is, of course, the risk of potentially losing the original investment if the loanee defaults. A strong vetting process can help mitigate such risks: Benefit Chicago, for example, relies on an Advisory Council of community experts and highly experienced investors to vet candidates and select recipients.

PRIs are also exempt from many restrictions surrounding a foundation’s investment practices. As such, should the PRI be structured incorrectly, it is possible that the PRI will be re-qualified as a regular investment and thus subject to Excess Business Holdings tax (a rare occurrence, by most accounts). The risks are easily mitigated through diversifying investments, not overcommitting into PRIs, and ensuring that the foundation’s interest in a single for-profit entity does not exceed 20%.

Sounds great. What’s next?
There are multiple ways for a donor to take the next step on PRIs, depending on willingness and opportunities:

  1. Connect with national experts. For those who’d only like to learn, many national expert organizations and actual practitioners would be pleased to share their knowledge.
  2. Learn more about local PRI opportunities. You can undertake additional research on what actual PRI opportunities are out there in your local area. Your local community foundation or a local Community Development Financial Institutions (CDFIs) could be good places to start.
  3. Consider investing. Should a concrete opportunity surfaces, you can redirect portion of your giving into a PRI project, or even work to build or support a funding coalition.