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A little creative thinking and careful investing can lead to good changes in the world. Whether it’s civil rights, education, art and culture, human rights, or other causes, philanthropy pays off in many ways. We at Falcons Rock Impact Investments thought that the Ford Foundation and their decades of work in impact investing were worth paying special attention to as an organization in touch with its past, present, and future.

Defining Impact

There will likely always be a search for a perfect definition of “impact” when it comes to investments. Whether it’s a question of how impact is generated, what form it takes, or how to quantitatively measure its extent, the particulars are going to be discussed for years to come. The discussion has been going on for a while, even if the conversation has changed somewhat: investing in socially responsible initiatives goes back to when modern stock markets first began to take shape and concerns were more about whether or not to invest in certain stocks—like tobacco or alcohol—that had good financial returns. However, modern impact investing is less about excluding and more about building on and including good works.

The Ford Foundation’s History of Impact Investing

In April 1967, the Ford Foundation’s staff had a belief that philanthropy wasn’t the opposite of investments, but that those two concepts existed on a spectrum. With this in mind, they presented their trustees with a report entitled Program-Directed Investments. The report went over well: the following year, the foundation worked for and got a ruling from the IRS that allowed them to create program-related investments (PRIs), then a new investment vehicle.

The Ford Foundation has put more than $670 million into PRIs that aid in affordable housing, equal access to financial services and markets, job creation, arts and culture, and other socially responsible efforts. The law considers PRIs—which can take forms like loans, guarantees, and equity—to be charitable investments, and therefore they must meet legal standards for charitable causes and come out of a foundation’s program budget. While they’re expected to be repaid, PRIs are not necessarily expected to provide financial returns: they are designed to align with a foundation’s commitments in a way that allows them to tap into new and creative uses for endowments that other investors can’t or won’t do.

The Future of Ford Foundation’s Impact Investing

Given their past legacy of philanthropy and Henry Ford II’s call to closely examine the responsibilities that companies and foundations have toward the communities in which they exist, the Ford Foundation made the decision to keep their history moving forward. Over the next 10 years, the foundation will gradually invest up to $1 billion of their endowment in mission-related investment (MRI) funds. This investment is rooted in their mission and will complement existing grant-making and PRI efforts and help to build and reshape the economy as well as the young impact investing sector. Like PRIs, MRIs are designed to use the power of endowments to achieve the mission that the foundation sets out to achieve: unlike PRIs, however, MRIs are more expected to achieve financial returns and provide larger amounts of capital to fulfill multiple bottom lines.

How American Foundations Approach Impact Investing

The Ford Foundation isn’t the first foundation to commit part of its endowments to social betterment, and it will not be the last to take on this important mission. As investors demand sustainable and responsible investment options, all kinds of players in the capital market are making moves to provide them, and they’re in the best place to do so. So why haven’t they? There are three big reasons.


It hasn’t always been clear whether MRIs could meet the standards that investors required or the government requirements about how foundations could invest their endowments. However, the United States Treasury wanted to encourage MRIs because of how good they are for the world. Their legality was officially clarified and established as of last year.


When splitting the focus between financial and social returns, there will be questions about whether an MRI can do either well—and whether there’s enough data to satisfy prudent investors. While this field needs to grow and mature in order to get consistent data, there’s enough financial growth in this investment area that there’s a reason to be reassured. With regards to social returns, there are much more precise tools to measure impact and a number of councils and organizations dedicated to taking measures to improve impact investing.

Board Responsibilities

Foundation boards, no matter how socially responsible the foundation strives to be, have a primary focus of being able to sustain their grant-making power. After all, there are investment portfolios to consider. It’s important that foundations make smart investments for their own finances, for the work that they do, and for all of the smaller organizations that rely on the support that they provide. However, responsibility with these investments is the way forward, and just like the world can evolve, so can MRI funds and the foundations that invest in them.

Falcons Rock Impact Investments

It’s more possible than ever now to find ways to do some social good and invest money where it really counts. Falcons Rock Impact Investments offers impact investment portfolios to meet various investors’ needs and preferences. To learn more about how we work and how to get started, view our process.