This presentation was my grad school final which focused on social impact investments in the nonprofit sector. This presentation was meant to serve as a "impact investment for dummies" in order to introduce the topic to those who may be unfamiliar with the intricacies behind impact investing- including myself. Social impact investing is the practice of providing financial opportunities to social causes and to the organizations who address these issues. Social impact investments are treated as loans in which nonprofit organizations are typically required to pay back at low or no interest rates and can also be a tool for individual investors to fund causes and can seek a return on their investment. There are various forms of impact investing tools including program related investments (PRI), mission related investments (MRI), social impact bonds, social impact guarantees, outcome-based contracting, and impact evaluations; all with their own unique qualities and legal classifications. This research explores the practice of social impact investing, how individuals are investing, the organizations who grant these types of investments, the impact and future of the nonprofit sector through these investments, and the rise of social impact investing practices. This research is also meant to shed light on which organizations are most attractive and eligible for social impact investments, the best practices for applying and maintaining these investments, while providing legal and strategic recommendations in the practice of investing for social impact.

1. N’Vest: Sustainability through Impact
Investments in the Nonprofit Sector
Robert S. Williams
Class 622-02 Capstone
Summer 2018
MASTER OF NONPROFIT
ADMINISTRATION

2. MNA MASTER OF NONPROFIT ADMINISTRATION
OVERVIEW / INTRODUCTION
▪ Impact investing is the practice of financing
socially driven causes for a charitable purpose
and/or garner a return on investment in order to
reinvest that money in other issue areas and
organizations.
▪ The impact investment industry is expected to
grow to $1 trillion by the year 2020, which is
attributed to the transfer of wealth and growing
interest in the trend.
▪ Impact investments can come in the form of cash,
equity, loans, bonds, stock, limited partnership
interests, guarantees, and letters of credit.
▪ There are various industry and legal terms for
impact investments including program related
investments (PRI), mission related investments
(MRI), social impact bonds, social impact
guarantees, outcome based contracting, and
impact evaluations.

3. MNA MASTER OF NONPROFIT ADMINISTRATION
OBJECTIVES AND VALUES
❖ Explain, expand, and provide insight on the role of
impact investing within the nonprofit sector.
❖ Describe how impact investing contributes to
social causes.
❖ Provide historical background on social impact
investments.
❖ Give perspective on impact investments from
the viewpoint of the individual investor as well
as from the viewpoint of nonprofit
organizations.
❖ Discuss emerging trends of impact investments,
and how this will affect the nonprofit sector.
❖ Demystify the impact investment practice to
make it more tangible and accessible to broader
audiences.

4. MNA MASTER OF NONPROFIT ADMINISTRATION
METHODS AND APPROACHES
1. Read financial reports, case studies, and news articles;
2. Researched social impact investing trends over time;
3. Analyzed and gathered sources provided by the IRS and
federal law governing impact investments;
4. Conducted expert interviews with leaders in the
philanthropic sector who work for entities that manage
impact investments within nonprofit organizations; and
5. Aggregated various research tools to form implications and
conclusions of the changing impact investing market.

5. MNA MASTER OF NONPROFIT ADMINISTRATION
TIMELINE

6. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Holistic View of Social
Impact Investing
2017 Impact Investing Report
(data from 2016)
● 209 impact investor organizations
responded.
● Respondents responsible for USD
$114B in impact assets.
● 82% are market-rate investors, and
61% are below-market rate
investors.
● For-profit fund managers responded
the most investment activity.
○ Foundation, for-profit fund
managers, and insurance
companies all reported +30%
growth in capital invested.
○ Banks reported highest levels
of activity in 2016.

7. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Holistic View of Social
Impact Investing

8. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Perspective
American individuals, estates, foundations and corporations
contributed an estimated $390.05 billion to U.S. charities in 2016,
according to Giving USA 2017: The Annual Report on
Philanthropy for the Year 2016

9. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Perspective;
Investments vs. Donations

10. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Who is Investing?
WHO
With
What

11. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Who Is Investing?
● By 2020, women are projected to hold
$72 trillion of private wealth, which is one
third of the overall global total.
(Boston Consulting Group)
● 63% of women stated they were more
likely to invest in social, political, and
environmental causes compared to 41%
of men. (U.S. Trust)
● $7 trillion globally will pass into the hands
of millenials between the years 2017 and
2020. (Boston Consulting Group)
● 67% of millennials reported that they
wanted their investment portfolio to reflect
their values. (U.S. Trust)
(All information above was gathered from a Forbes Magazine article)

12. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Program Related
Investments (PRI)
▪ The one type of impact investment tool codified
by the IRS/federal law is called program
related investments (PRI), which applies
solely to private foundations.
▪ The three factors IRS places on PRI’s:
i. The primary purpose is to accomplish one or
more of the foundation's exempt purposes;
ii. Production of income or appreciation of
property is not a significant purpose; and
iii.Influencing legislation or taking part in
political campaigns on behalf of candidates is
not a purpose.

13. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: Program Related
Investments (PRI)
Source: IRS.gov

14. MNA MASTER OF NONPROFIT ADMINISTRATION
DATA ANALYSIS: PRI vs. MRI
Section 4944 and
§§ 53.4944-1 through 53.4944-6 of
the Internal Revenue Code.
Primary purpose of the investment
must be for charity (aka exempt
purposes) and not a return on
investment, and a private
foundation can count PRI’s toward
their annual grantmaking
requirements.
Is an industry term not codified into tax
law, and cannot be used to fulfill a
private foundation’s annual grantmaking
requirements.

15. MNA MASTER OF NONPROFIT ADMINISTRATION
IMPLICATIONS
● Increases in impact investing will affect greater change needed to
address social issues.
○ Donations feed an immediate need
○ Impact investments funnel capital for longer term impact
○ Investments use the same dollar to solve many issues
● Women and millennials will lead the impact investment trend because
data has shown that these segments are highly motivated by investment
portfolios that align with their values.
○ As women and millennials become wealthier, so will the impact
investment industry.
● Because younger generations are interested in impact investing, this
trend may overtake donations as the main financial tool for the
philanthropic sector.
○ Competition of the industry could lead to lower interest rates issued
by lenders.

16. MNA MASTER OF NONPROFIT ADMINISTRATION
RECOMMENDATIONS
1. Contact a lawyer or a financial advisor to assist you on all the intricacies of
impact investing;
2. Understand the different types of ways impact investments can be made (through
a donor advised fund, directly to cause, through a bank institution, through a
nonprofit foundation fund, etc);
3. Research what causes receive the greatest return on investment;
4. Pay attention to the wording of your investment contract;
5. Be aware that program related investments (PRI) are the only type of impact
investment codified by federal tax law for private foundations, and must have a
charitable purpose for investment; and
6. Do not put all your eggs in one basket; diversify your investment portfolio with
both impact investments, grants, at various stages of risk, and multiple causes to
achieve greater impact.

17. MNA MASTER OF NONPROFIT ADMINISTRATION
REFERENCES
Walker, D. (2018, April 06). Unleashing the power of endowments: The next great
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https://www.fordfoundation.org/ideas/equals-change-blog/posts/unleashing-th
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investments
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m-related-invesments-private-foundation-expenditure-responsibility
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About Impact Investing. (2018, April 13). Retrieved from
https://missioninvestors.org/about-impact-investing

18. MNA MASTER OF NONPROFIT ADMINISTRATION
REFERENCES
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from Global Impact Investing Network website:
https://thegiin.org/assets/GIIN_AnnualImpactInvestorSurvey_2017_Web_Final.pdf
Ategeka, C. (2016, January 04). Why Impact Investing Is Hurting Nonprofits. Retrieved from
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Boulden, J. (2017, June 27). Making money and doing good: Impact investing is catching on. Retrieved June 5,
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Definition of market rate. (n.d.). Retrieved June 5, 2018, from http://lexicon.ft.com/term?term=market-rate
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Giving USA. (2017, June 12). Giving USA 2017: Total Charitable Donations Rise to New High of $390.05 Billion.
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Gunn, N. N. (2018, March 13). How Nonprofits Can Tap Into the Impact Investment Market (SSIR). Retrieved
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19. MNA MASTER OF NONPROFIT ADMINISTRATION
REFERENCES
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Impact Investment Grant Guidelines. (2017, September). Retrieved June 5, 2018, from
https://www.macfound.org/info-grantseekers/grantmaking-guidelines/pri-grant-guidelines/
Leung, G. (2017, February 14). Impact Investing | Market Overview(Rep.). Retrieved June 5, 2018, from
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Mission Throttle. (n.d.). Retrieved June 5, 2018, from http://missionthrottle.com/
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Moskowitz, D. (2015, June 09). Impact Investing: How it Works and How to Invest. Retrieved June 5, 2018, from
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Mudaliar, A., Schiff, H., Bass, R., & Dithrich, H. (2017, May 17). Annual Impact Investor Survey 2017. Retrieved
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Polanco, H. H., & Summers, J. (2017, April 25). Keeping It in Reserve: Grantmaking for a Rainy Day. Retrieved
June 5, 2018, from https://nonprofitquarterly.org/2017/03/16/non-profit-rainy-day-grant-making-keeping-it-in-
reserve/

20. MNA MASTER OF NONPROFIT ADMINISTRATION
REFERENCES
Pratt, J., & McCambridge, R. (2017, May 16). Ford Foundation Philanthropy Puts $1B into Mission-related Investments. Retrieved June
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