Through two funds, Ford makes investments that are aligned with our social justice mission: a long-standing program-related investment (PRI) fund, financed through our grant budget, and a new mission-related investment (MRI) fund, which is part of our endowment. Through both, we seek to generate impact directly, and also to generate lessons of broader value to the investing marketplace.
The PRI Fund is a catalytic source of capital that is especially important for bearing the risks of early-stage innovation. The Ford Foundation pioneered the use of PRIs in 1968, and since then we have invested more than $630 million in the form of debt capital, equity, and guarantees.
Historically, Ford has used PRIs to support social entrepreneurs and community development institutions in their efforts to preserve affordable housing, improve access to financial services and markets, create quality jobs, and advance arts and media. As risk capital, our PRIs have seeded innovative new forms of finance—including America’s first affordable housing real estate investment trust (REIT)—and helped seed and scale the fields of microfinance in the Global South and community development financial institutions (CDFIs) in the US. Now, our PRIs are targeting opportunities to advance first-time impact investing fund managers, with a priority to support management teams that are diverse in terms of race and gender. We also emphasize the use of PRIs as a catalyst for scaling private sector investment—for example, by reducing real and perceived risks in key impact sectors.
PRIs generally come out of a foundation’s grant budget and count toward the five percent of assets that US foundations are required, under tax law, to pay out every year. PRIs must primarily serve a charitable purpose; for tax reasons the principal is treated like a grant. Unlike grants, however, PRIs are expected to be repaid. Unlike mission-related investments, PRIs are not designed to deliver competitive market rates of financial return.
Our success in managing PRIs encouraged us to take the next step: mission-related investments (MRIs) made directly from our endowment. In 2017, we announced our commitment to invest $1 billion in this way over the next 10 years.
Like traditional endowment investments, MRIs must meet prudent investment standards. The difference is that with MRIs, we also seek to advance our mission by generating social impact. These “double bottom line” investments can put large amounts of capital to work, and help show how impact investing can become a mainstream practice. We believe MRIs are a critical tool for social transformation, in philanthropy and beyond.
Our early MRIs are aimed at challenges that are central to our mission of disrupting inequality and focus mainly on private markets. In the United States, where there is a dire shortage of and desperate need for affordable housing, our investments seek to preserve the existing supply of rental housing and expand it—while supporting services that enhance residents’ quality of life. In developing countries, we seek to expand access to vital financial services, often through new technologies, particularly for low-income and other traditionally underserved communities. We also hope to make diversity, equity, and inclusion bywords of this investment movement, paying attention to the makeup of investment teams, as well as where they invest and with what values.
Our PRIs and MRIs are managed by a team of dedicated investment professionals who report to our program leadership, with the foundation’s investment team playing an advisory role. Each MRI is approved by a committee of the Board of Trustees.