Impact Investing Comparative Chart
The chart below provides a brief overview of the similarities and differences among Program-Related Investments, Mission-Related Investments, and Socially Responsible Investments.
It should be noted that this summary is necessarily oversimplified, and a foundation wishing to engage in one of these investment strategies should carefully consider the practical and tax implications. Private operating foundations, in particular, should proceed cautiously when seeking to characterize specific impact investments as PRIs or MRIs because PRIs may affect an organization’s ability to qualify as a private operating foundation. For more information, refer to our primer on impact investing and please do not hesitate to contact us if you if you have any questions about these various distinctions.
|Program-Related Investments||Mission-Related Investments||Socially Responsible Investments|
|Relationship of Investment to Charitable Purpose of Foundation||
||Should reflect charitable mission of the organization||Investment does not need to be related to charitable mission of the organization|
|Financial Benefit to the Investment?
|Counts Toward 5% Annual Payout?||Yes, and PRI is excluded from foundation’s assets used to calculate 5% distributions||No||No|
|Noncharitable Recipients Allowed?||Yes, so long as purposes of the investment are charitable as described above||Yes||Yes|
|Reporting||Must be specifically identified on 990-PF||Reported with all the foundation’s other investments; no special reporting required||Reported with all the foundation’s other investments; no special reporting required|
|Prudent Investment Standard?||Need not be a prudent financial investment (exempted from prudent investor standard)||Needs to be a prudent financial investment subject to state law||Needs to be a prudent financial investment subject to state law|
|Investment income tax §4940||Excise tax on net investment income applies||Excise tax on net investment income applies||Excise tax on net investment income applies|
|Treatment of capital gains
||Capital gains on equity investment are taxable||Capital gains on equity investment are taxable||Capital gains on equity investment are taxable|
|Excess business holdings §4943
||PRIs are not included in calculation of excess business holdings||Restrictions on excess business holdings apply||Restrictions on excess business holdings apply|
|Jeopardizing investments §4944
||PRIs are exempted from jeopardizing investment rules||Subject to jeopardizing investment rules||Subject to jeopardizing investment rules|
|Taxable expenditures §4945
||Rules regarding taxable expenditures apply; expenditure responsibility required||Rules regarding taxable expenditures do not apply||Rules regarding taxable expenditures do not apply|
|Self-dealing rules §4941
||Self-dealing prohibitions apply||Self-dealing prohibitions apply||Self-dealing prohibitions apply|
|Unrelated business income tax rules (UBIT)||UBIT rules apply, but PRIs usually avoid them by being substantially related to exempt purposes||UBIT rules apply||UBIT rules apply|