Investing for impact
Overcoming many of the world’s most pressing social and environmental problems—including economic inequality and climate change—will require harnessing the power of investment capital. That means the full spectrum of capital: from philanthropy to pension and sovereign wealth funds.
At the Ford Foundation, we are committed to leveraging capital markets to create lasting change. We believe this approach will not only generate financial returns but lead to better investing overall.
Our efforts to advance the field of impact investing are focused in a few distinct but closely connected areas. Through strategic grant making in market infrastructure, broader field and coalition-building, and mission investing, we aim to grow and strengthen the practice of impact investing. Working with a growing array of partners worldwide, we seek to catalyze new sources of capital and, ultimately, transform the broader capital markets.
Strengthening the field
Grants to support impact investing
Through our work on Inclusive Economies, we make grants to build and strengthen the infrastructure of the impact investment market—with an eye to shaping the broader capital markets. We do this by supporting policies and practices to help the marketplace expand around the world, and by building awareness about how and why impact investing works. This includes supporting efforts to increase the availability of information on financial and impact performance, as well as creating better tools to assess environmental, social, and governance risk. We aim to enhance the market infrastructure to help create long-term value and aligned market incentives.
The US Impact Investing Alliance
As part of our commitment to strengthening the impact investing field, we are helping to support the development of the US Impact Investing Alliance, a network of leaders focused on using capital for social good. Partnering with financial institutions, high net worth individuals, and philanthropy leaders, the Alliance raises awareness of impact investing in the United States, fosters deployment of impact capital, and works with stakeholders to help build the impact investing ecosystem globally. The Alliance aims to put measurable social and environmental impact at the center of investment decision-making, alongside financial return and risk.
The Alliance is supported by the Ford Foundation, and a range of other individual and institutional funders who share our commitment to impact investing. Learn more.
Through two funds, Ford makes investments that are aligned with our social justice mission: a longstanding program-related investment (PRI) fund, financed through our grant budget, and a new mission-related investment (MRI) fund, invested from our endowment.
Our program-related investments (PRI) fund is meant to be a catalytic source of capital that encourages other investors and develops impact investing as a practice—with the goal of reducing inequality and advancing social justice. The Ford Foundation pioneered the use of PRIs, and since 1968 we have invested more than $630 million in the form of innovative credit enhancement, equity, or debt capital.
As a tool, PRIs allow foundations to use investments to spur social impact—such as supporting 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. Our PRIs are directly aligned with our programmatic goals.
PRIs generally come out of a foundation’s program budget and count toward the five percent of assets that US foundations are required to pay out every year. PRIs must primarily serve a charitable purpose; for tax purposes they are treated like grants. Unlike grants, however, PRIs are expected to be repaid. Unlike mission-related investments (see below), PRIs are not expected to provide a return at competitive market rates.