Impact investments are made by foundations of all types and sizes, as well as individuals. They include investments across all asset classes and along the entire spectrum of risk and return, from program-related investments (PRIs) to market-rate investments that yield competitive rates of return.
Impact investing refers to the intentional deployment of funds by investors that seek both a social and a financial return. It grows out of the practice of social or socially responsible investing (which includes positive and negative screening and shareholder advocacy) and mission investing (investments by mission-based organizations). All three terms are currently used interchangeably.
Consider Impact Investing
By becoming an impact investor, you can put more or even all of your financial resources to work in support of your philanthropic mission.
“Whatever the terminology, a smart investment is one that matches the right kind of capital to the problem you are seeking to solve. If the desired result is solely programmatic, a grant will do. To capitalize a social or environmental initiative while preserving assets for future uses, consider a program-related investment. To further mission and build assets, find a market-rate investment that will also lead to positive, measurable social returns. More foundations than ever are using all three approaches and some are working to deploy 100% of their resources in mission investments.”
- Peter Berliner, former CEO of Mission Investors Exchange
Financial vs. Social Returns
There is a common misperception that impact investing risks financial return at the expense of social return. There are many—and increasingly more—impact investment tools available with market-rate returns, and a number of studies show that impact investing doesn’t sacrifice return and may, in fact, lead to better returns.
2015 IRS Ruling Makes Impact or Mission-Related Investing Easier
The Treasury Department's 2015 guidelines for mission-related investments state that "a private foundation will not be subject to tax under section 4944 if foundation managers who have exercised ordinary business care and prudence make an investment that furthers the foundation's charitable purposes at an expected rate of return that is less than what the foundation might obtain from an investment that is unrelated to its charitable purposes."
New IRS Rule Likely to Make Impact Investing Easier
Back to top