Mission Related Investing for Foundations & Nonprofit Organizations

Foundations are increasingly focused on aligning their investments with their missions, a process known as mission-related investing. While this trend has been growing for decades, the recent surge in socially responsible investing has made mission-related investing a growing priority for foundations of all sizes.

What are Mission Related Investments? 

Mission-related investments are investments made by foundations to achieve both financial and social goals. These investments are designed to create positive social or environmental impact that are aligned with the organization's mission, while also generating financial returns.

Unlike program-related Investments (PRIs), MRIs do not count towards the foundation’s annual 5% distribution requirement.

To provide additional clarity, we have defined the difference between impact investing, PRIs, and MRIs below.

• Impact investing involves investing in businesses, organizations, and funds with the intention of generating positive, measurable social and environmental impact. Impact investing can encompass a wide range of sectors, including affordable housing, education, renewable energy, and more. These investments are typically made in either for-profit or non-profit entities and can be made through a range of asset classes, including public equities, fixed income, and private equity. Return expectations may be market rate or below market rate at time of investment.
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• Program-Related Investments (PRIs) are investments made by foundations that support their charitable mission and are not expected to generate a significant financial return. To be considered a PRI, the IRS mandates that the primary purpose must be to accomplish one or more of the foundation’s exempt purposes, production of income or appreciation of property is not a significant purpose, and influencing legislation or taking part in political campaigns on behalf of candidates is not a purpose. PRIs can take the form of loans, loan guarantees, equity investments, or other forms of investment that meet certain IRS criteria. For private foundations, PRIs are eligible to count against the 5% annual distribution.
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• Mission-Related Investments (MRIs) refers to investments made by foundations that align with their mission and are return expectations are generally considered to be market rate. For example, a foundation focused on environmental sustainability may choose to invest in companies that are leaders in climate related technology solutions. The primary difference is that MRIs are viewed as a tool for achieving the foundation's broader mission, rather than a separate investment strategy. Unlike PRIs, MRIs are not an official IRS designation and are not eligible to count against the 5% annual distribution.

Why Mission-Related Investing is Important for Foundations

Mission-related investing is becoming an increasingly important priority for foundations, as it enables them to use their investment portfolios to support their mission and values. By aligning their investments with their missions, foundations can ensure that their financial resources are being used to have a positive impact on society and the environment. Additionally, mission-related investing can help foundations to:

• Differentiate themselves in a competitive market;
• Attract and retain talented employees and volunteers;
• Increase their impact and influence; and
• Foster strong relationships with grantees, stakeholders, and partners

How an Outsourced Chief Investment Office (OCIO) Can Help with Mission-Related Investing

For foundations, managing mission-related investments can be challenging. A lack of investment expertise, resources, and time can make it difficult to effectively manage these investments. An outsourced chief investment office (OCIO) is a third-party that provides investment management services to organizations, including foundations. An OCIO can offer a range of services, including portfolio management, investment strategy development, and risk management. An OCIO can bring a wealth of investment knowledge and expertise to a foundation, as well as provide access to sophisticated investment tools and resources.

For example, an OCIO can assist a foundation in developing a Mission-Related Investment plan via:‍

• ‍Expertise: OCIOs bring deep investment expertise and experience to the table, helping foundations to identify and pursue mission-related investment opportunities.
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• Resources: OCIOs provide access to a range of resources, including research, due diligence, and risk management tools. This can help foundations to better understand the investment landscape and make informed investment decisions.
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• Support: OCIOs offer a range of support services, including portfolio management, reporting, and oversight. This helps foundations to effectively manage their mission-related investments and ensure that they are aligned with their mission and values, while still achieving their financial objectives.

Conclusion

Mission-related investments (MRIs) have emerged as a significant focus for foundations, enabling them to harmonize their investments with their mission and values. By investing in mission-aligned opportunities, foundations can simultaneously attain financial returns and social impact. MRIs also allow foundations to employ their endowments to generate positive social and environmental outcomes, consistent with their objectives. Utilizing OCIO services can facilitate mission-related investing for foundations by offering essential expertise, resources, and support, empowering them to leverage their assets effectively for meaningful change.

Impact is our ethos: At Fire Capital Management, we seek out opportunities that provide both financial and social returns. We’ll work with you to develop an impact strategy to help you focus your giving on the causes that you care about and to build your legacy, from the way you invest to the way you give.
Get started on making the impact that's important to you.

Looking for more detail on Sustainable and Impact Investing terminology? View our ESG Investing Definition Glossary.