Tools & Resources

An Introduction to Mission-Related Investments

At a time when foundations face a critical opportunity to explore tools to align their endowment assets with mission or values, many foundations may be asking themselves basic questions like: What are MRIs and should I make the transition? Depending on a foundation’s goals and resources, MRIs can be a useful tool for impact and take on a variety of shapes and sizes, but at their core, they are a financial tool used by foundations to place more — or all — of their assets in service of mission or impact. 
MRIs are typically risk-adjusted or "prudent", market-rate investments made from the foundation's endowment — or what some affectionately call the other 95% — to advance a foundation's mission across asset class and issue area. Unlike program-related investments (PRIs), MRIs are not an official IRS designation, and different funders utilize different names to refer to this kind of impact investment. PRIs are another tool foundations can use to align their assets in service of their mission. The key differentiator between MRIs and PRIs is that PRIs are essentially a program activity for tax and compliance purposes and must primarily be made to advance the charitable purpose of the foundation, and not to achieve an investment return.

Understanding MRIs in Action 

In 2015 the IRS gave guidance on the use of MRIs which enabled foundations to consider mission as a way to meet the "prudent investment" standard for federal purposes, essentially harmonizing federal and state law in this area. Historically, there was confusion as to whether a private foundation needed to make investments that focused primarily/exclusively on financial returns to comply with the Section 4944 jeopardizing investment rules under federal law. The new guidance clarifies that foundation managers are not limited to choosing investments that drive the highest financial return. But rather, they can consider mission as part of that decision-making process as long as they take careful and prudent steps to ensure their investment decisions support the foundation's charitable purpose. To learn more about this guidance read this blog from the Council on Foundations or watch the webinar below. 

This guidance was a radical shift, allowing leading foundations to take bold steps toward activating their endowment for impact. In fact, in 2017, the Ford Foundation made a historic commitment to move beyond PRIs and allocate up to $1 billion of its $12 billion endowment over the next 10 years to MRIs. In an effort to educate other foundations about their approach, they developed a brief video (see below) which helps explain what MRIs are, how organizations can use them, and the impact potential of MRIs. For additional information on Ford's journey, watch this webinar recording which explores how Ford engaged its trustees and revised its investment strategy through MRIs.



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