Alternative Investments in Social Projects: Why Grant-Makers Participate in Program-Related Investment
Available funds for social enterprises are extremely limited and fragmented, while most traditional grant money goes to large established non-profit organizations. Social enterprises fall somewhere in between traditional non-profits, which rely fully on grants, and for-profit businesses, which have venture capital and other sources of funding available to them. By definition, these organizations have revenue generating activities that at least loosely support a social mission. A social enterprise is often referred to as a double bottom line organization, because it focuses on both a traditional financial return and a social return. (A triple bottom line organization refers to a social enterprise that also has environmental goals.) One additional option for investment in a social enterprise project is PRI (Program-Related Investment,) which potentially gives tax incentives to foundations and other investors in order to support social projects with positive, but below market, financial returns on investment. PRI allows grant-makers to invest capital in projects with a financial return, or a return of the principal amount invested, which in turn means those funds can be re-invested. This study focuses on the grant-makers that have participated in PRI and those variables that may help predict future investment. Using ordinary least squares (OLS) regression models, I conclude that larger foundations are making PRI's more frequently and for larger amounts than their smaller counterparts. However, neither the number of PRI grants nor the total amount given are correlated with total foundation grants in a given year, suggesting that PRI programs are not yet part of the formalized structure of grant-making across all foundations. In order to improve our understanding of PRI programs and their efficacy, more and different data need to be collected. This is also what foundations may need to see before investing further in this area.
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