The number of private foundations in the U.S. and the amount of their endowments has grown considerably over the past decade (see Appendix Chart A). In 2013, 87,000 U.S. foundations collectively held about $800 billion in endowments. Such foundations annually spend at least 5% of their endowments, typically on grants and support costs to benefit their charitable missions—funding that totaled a minimum of $40 billion in 2013. However, few foundations actually go further and use social impact investing tools—such as Program Related Investment (PRI) and Mission Related Investment (MRI)—to advance their charitable missions beyond grant making.

PRIs/MRIs have the potential to not only further the mission of a foundation, but also unlock additional financing for social initiatives. Yet, while many foundations have explored opportunities to leverage PRIs/MRIs to further their missions, the level of such outlays is surprisingly small, comprising less than 2% of private foundation endowments. Why? A number of barriers exist that prevent the broad use of such social investing tools.

These barriers should be understood and addressed to potentially expand the depth, breadth and use of private investing tools since they have the possibility to greater amplify a foundation’s core mission as well as provide subsidized debt or equity to social enterprises.  If private foundations spent 3% more of their endowments on PRIs and MRIs, an additional $24 billion in capital could become available to enable improved sustainability of social enterprises and the recycling of philanthropic capital.