Program-Related Investments

This chapter is one in a series that looks inside the Robert Wood Johnson Foundation. Past volumes of the Anthology have examined the Foundation's research and communications strategies, its core values and the thinking that led it to address substance abuse. Here, Marco Navarro, a program officer at the Foundation, and Peter Goodwin, the Foundation's treasurer at the time, discuss a little-known philanthropic tool: program-related investments, or PRIs.

A PRI is essentially a loan. The loan approach can be appropriate when an organization realistically expects its initiative to generate enough income to repay the loan—for example, by buying a building that will bring in rental income. Most often associated with the Ford Foundation and the MacArthur Foundation, which pioneered their use, PRIs have become more common as the assets of foundations have increased. From 1998 to 1999, PRI authorizations nationally jumped from $203 million to $267 million—a rise of 31 percent. Still, PRIs represent only a small percentage of foundations' awards; in 1999, the nation's 50,000 foundations distributed $23 billion in the form of grants.

In the world of foundations, the current buzz term is "venture philanthropy," which means that foundations adopt a businesslike attitude and explore how their investments can bring about measurable payoffs in terms of social outcomes. PRIs are, in a sense, precursors to this venture philanthropy approach. Why would a foundation such as Robert Wood Johnson, with more than $8 billion in assets at the time this chapter was prepared, make a loan as opposed to an outright grant to a struggling nonprofit trying to develop an initiative? In this chapter, Navarro and Goodwin address this issue as they examine the Robert Wood Johnson Foundation's experience with PRIs.