Lifting the Fog on PRIs
As the impact investing movement has gained momentum in Minnesota, interest in PRIs has grown. Yet very little research has ever been done about PRIs in the state, and to this point, the absence of quality data about PRIs has been an impediment to their diffusion. To some, PRIs come across as an urban legend; everyone has heard stories about PRIs but few have actually experienced one directly.
Recognizing the need to demystify PRIs, Venn Foundation undertook this ambitious research project to learn how PRIs have been used historically by Minnesota private foundations from 1998 to 2016. Our goal was to put our own fingers on the state’s PRI pulse and then report back the results, providing the entire philanthropic ecosystem in Minnesota with high-quality baseline statistics on how PRIs have been used in the past, right at a time when many are discussing how best to utilize them in the future.
So what then have we learned? The big takeaway for us is that in the context of all charitable activity undertaken by Minnesota’s private foundations over the last two decades, PRIs have been a niche tool used only by a small group of pioneering private foundations. And although $164 million is a meaningful amount of money, in terms of the $23 billion (adjusted) that Minnesota private foundations and corporate grantmakers have distributed for charitable causes since 1998, it could be considered a rounding error.
Nonetheless, this report also shows that important groundwork has already been laid for the widespread adoption of PRIs. Thanks to the leadership of the 39 private foundations included in this report, PRIs cannot be written off as some new tool without a track record. Indeed, Minnesota now has 554 case studies and pilot projects that it can point to, learn from, and emulate as it moves forward. Whether through educational loans to individuals or equity investments in a recycling infrastructure fund, these leading foundations have demonstrated the wide variety of ways that PRIs can be used to advance charitable goals.
Overall, these leading foundations also appear satisfied with their PRIs and plan to continue making more in the years ahead. In an informal survey collected as part of our research process, to which 15 Minnesota private foundations (~40% of the dataset) responded, 80% said they were very or somewhat satisfied with both the charitable impact and financial results of their past PRIs. 80% also reported that they were very or somewhat likely to make a new PRI within the next two years.
Yet systemic barriers remain. In the same survey, when asked about what keeps more foundations from making PRIs or from doing so more regularly, 87% identified limited staff/board capacity and experience with PRIs as a key challenge. One respondent elaborated, “It requires a broad range of skills to identify, scope out, negotiate, and close a PRI. It also requires a huge amount of time.” Another explained, “It was expensive from a staff time and legal fees standpoint. We might do more of these if we could make it less expensive.” Making it easier for private foundations to use PRIs is important for increasing adoption.
Even before capacity constraints, however, come knowledge barriers. 73% of survey respondents also pointed to a general lack of awareness about PRIs as a reason for low utilization. One private foundation explained, “It is important that everyone reading the report understands how little is known about PRIs and how they work. In our case, we actually did not even realize we were doing this type of investment. Our accountant reported we were, and it was the reason we were included. During the process, we educated ourselves and confirmed that our information was being correctly reported. Now we look forward to doing even more PRIs in the future.”
Given the importance of information, it is clear that more and ongoing research on PRIs is necessary. Our hope is that this report will spark a renewed interest in PRIs and hopefully lead to many other related studies. There certainly is no shortage of opportunities for more PRI research. Here are some of our initial ideas:
- Ask different questions of our existing dataset.
- Apply this same methodology again to Minnesota private foundations in future years to create a living, longitudinal dataset.
- Apply this same methodology to other states.
- Look deeper into the specific terms of the PRIs in this dataset as well as their impact and financial performance.
- Expand the scope of the research to include community foundations and/or Community Development Financial Institutions (CDFIs).
If one of these research ideas interests you, please reach out to us. We are open to sharing our experience and resources with research partners who share our goal of unleashing the full power of PRIs to advance charitable impact.
In the end, we hope that this report has left you with a sense not only for what has been done in the past with PRIs by Minnesota private foundations, but also for what is possible. We invite you to join us in picking up this promising tool and applying it to the charitable problems you care most about. In so doing, we are confident that we will together move PRIs from the margins of philanthropy to the mainstream.