In today’s socially-conscious world, nonprofit organizations are rightfully concerned about the types of investments they make. Impact investing is a term used to describe a series of investing techniques that seek to direct capital to enterprises and activities that promote measurable social benefits while simultaneously generating the requisite financial return. Nonprofit organizations may adopt an impact investing strategy that focuses on: (i) program-related investments (“PRIs”); (ii) mission-related investments (“MRIs”); (iii) socially responsible investing; or (iv) some combination of the above.
A PRI is an investment that is made to accomplish the investor’s charitable purposes, rather than being significantly motivated by the prospect of financial gain, while still seeking to generate at least a moderate rate of return.
An MRI is an investment that is expected to generate a rate of return slightly lower than the highest rate possible in the marketplace while also furthering the investor’s charitable purposes. Such an investment often focuses on promoting certain environmental, social, or governance factors.
Socially responsible investing is one of the terms often used to describe a method of investing that uses “negative screening” filters to exclude undesirable investments in companies that, for example, manufacture or use products such as oil, weapons, or tobacco.
While impact investing is growing in popularity, certain nonprofit organizations (most especially private foundations) are subject to various rules about how their assets may be prudently invested. Fleming Petenko’s lawyers can help you navigate these rules so that you can implement an investment strategy that meets your charitable goals while complying with applicable laws.