Program-related investments (“PRIs”) are powerful, versatile tools that foundations use to achieve their philanthropic goals alongside traditional grantmaking. Like grants, PRIs make inexpensive capital available to non-profit or for-profit enterprises that are addressing social and environmental challenges. Unlike grants, PRIs are expected to be repaid, often with a modest, risk-adjusted rate of return.
Yet for all the advantages inherent in PRIs, many foundations are still to make full use of them. This may be the result of lack of familiarity and knowledge of PRIs, limited demand (compared to grants), or questions about legal or tax related requirements associated with making PRIs. This publication seeks to address these concerns. This guide is designed to help foundations overcome barriers to using PRIs by providing a basic reference for private foundations and legal advisors concerning the regulations, processes, and documentation requirements related to PRIs. It contains information and guidance in navigating questions about what qualifies as a PRI, what types of documentation are important, and when external legal counsel may be needed. It also offers samples of legal documents that may be useful or necessary in developing, negotiating, or managing a PRI. This publication is also relevant to social investors and any other organizations or investors that want to understand the legal issues confronting private foundations in making PRIs. We hope that this guide will help foundations move forward in using PRIs to accomplish their goals and fulfill their missions.