A PRI is an investment that a tax-exempt charity makes at a rate below the market rate as part of its annual giving requirement. In order to keep their tax-exempt status, charitable foundations must give away at least 5% of their assets each year. Most of the time, this is done through grants to nonprofits. However, PRIs allow foundations to make for-profit investments (loans, guarantees, and equity investments) as long as the main goal of the investment is to help the foundation’s charitable mission and not to make money.
The IRS lets PRIs be treated as grants (and counted toward the annual giving requirement) as long as the goal of the investment is not to make market-rate returns. Based on IRS metrics, this means that an investor who is only interested in making money would probably not invest in the same way as the PRI. Foundations like Rockefeller and Skoll have used PRIs to invest in social enterprises and other high-impact businesses with a positive social impact. PRIs are related to “Mission-Related Investments,” but they are not the same thing (see “MRI”).