Another way the IDP Foundation engages in impact investing is through Program Related Investments (PRIs), created under the US Tax Reform Act of 1969 (Section 4944). Despite all the advantages of a PRI, this valuable investment tool remains severely underutilized. We encourage philanthropists to learn more about PRIs as a skillful way to invest for social impact.
What is a PRI?
PRIs are investments that can be made by a charitable foundation as part of their grantmaking as long as the investment furthers its charitable mission. Making returns on the investment is permitted provided it complies with the Internal Revenue Service’s rules. PRIs can take the form of loans, loan guarantees, lines of credit, linked deposits, or equity investments.
The IDP Foundation has been consistently on the forefront of utilizing PRIs as a highly useful addition to a pure grant to advance our philanthropic activities. PRIs allow us to engage in high risk but catalytic, early stage investments that potentially have enormous social impact. High risk investments were previously prohibited under the Prudent Investor Rule and could not be made out of grant funds.
If the PRI fails, it can be written off as a grant that counts towards the foundation’s mandatory annual disbursement of philanthropic funds. In our experience, this is one of the biggest benefits of a PRI. Conversely, if the investment is successful, the profits move into the normal investment activities of the corpus and are removed from the philanthropic giving. PRIs provide enormous benefits not only for the IDP Foundation but also for the recipient enterprise that often would prefer some form of investment instead of a grant.
One enterprise that we support with a PRI is Edovo, a Chicago-based technology company that is innovating, developing and creating progress through learning. Edovo is committed to building better lives for incarcerated individuals by bringing quality education, communication, and rehabilitation to millions of incarcerated people in the U.S. They have developed a tablet-based learning program preloaded with educational content that prepares inmates for a successful re-entry into the community. Content includes GED-preparation, behavioral therapy, and life skills training. Tablets are connected to a secure WIFI network and are formatted to only access the learning content. Our equity debt investment in Edovo enables us to build on our mission while also providing valuable capital for a socially impactful venture. Learn more about Edovo.
We believe that our ability to support potentially impactful social enterprises with investment solutions such as PRIs is an important way to spur sustainable solutions to complex global issues.