In our previous article, we discussed how program-related investments help fund non-profit organizations all around the world. However, this is just the tip of the iceberg when seeking funds for a non-profit.
We’ve taken a deeper dive into investments, traditional grantmaking, and fiscal sponsorship to shed some more light on these avenues of fundraising. If you’re unsure which direction to take when looking for funding, the following information will be of some help.
Mission Related Investments
The definition of a mission-related investment, or MRI, is quite simple. It’s a financial investment that furthers the mission of its organization. For instance, if a non-profit is dedicated to providing artistic opportunities for inner-city kids, an MRI would provide financing for a new art center development project.
An MRI is designed to achieve both a financial and social return. This means that the investment will have a positive charitable impact socially or in the environment, while simultaneously providing financial returns on the initial investment.
However, an MRI is classified as a commercial investment. As such, it must meet the same standards under state and federal laws that other investments are subject to.
MRI’s are favored due to their ability to cause change on a larger scale than other investments.
When an organization directs resources to support causes that align with their mission, they can implement screening, shareholder investment, and impactful investing. All of these activities contribute to a successful MRI.
Socially Responsible Investments
Socially responsible investments are investments made into companies that have socially ethical practices. In recent years, many companies have turned their attention to these areas, investing in fields like green technology or companies part of social justice movements.
While you will gravitate towards investing in companies with good practices, this also means you stay away from those encouraging harmful practices. This could include tobacco, alcohol, or gambling companies.
When investing, it’s important to keep in mind that “not all that glitters is gold.” Although a company may say that they are engaging in ethical practices, a closer look may reveal otherwise.
You’ll also need to consider both the social impact and financial gain. A company may have ethical practices, but may not perform the best financially. On the other hand, some companies perform well but are not as ethically sound.
This type of investing is recommended for those who have a clear view of their morals and stances on social issues. They’re able to demonstrate this to the world by ethically investing and staying true to their word.
How PRI’s Compare to MRI’s
Program-related investments and mission-related investments are both characterized by their intent to produce a significant positive social impact. They aim to help a foundation accomplish its charitable goals.
Although they have some similar aspects, these two investments fall into very different tax situations. A PRI is considered to be an investment that primarily serves a charitable purpose and is treated similarly to a grant for tax purposes.
On the other hand, an MRI is viewed as a financial investment and must meet investor standards that other commercial investments would be subject to.
In the area of public disclosure, any PRI’s made within the year must be disclosed by a private foundation through a form mandated by the IRS. MRI’s are do not require this special reporting. Instead, they are allowed to be reported to the IRS along with any other investments made that year.
Traditional Grant Making
While recent years have resulted in new ways to raise money for your non-profit, traditional grantmaking is still alive and well. Grantmaking is very straightforward. It consists of awarding a grant, or sum of money from a foundation or individual party to a non-profit organization.
In delivering this grant, this grantmaker aims to help further their charitable mission to deliver a social and beneficial impact.
Granters are generally searching for non-profits who have values that align with their company mission and objectives. They’ll analyze any prospective non-profits to see if their grant will benefit all parties involved.
Once an organization is approved, guidelines are created to set the tone for communication and collaboration between the two. The project or organization is then monitored and managed through a joint effort on both sides. The grantmaker will continue to determine whether or not their investment can provide them with financial or social returns.
Fiscal sponsorship is a great avenue to take for those who are just getting their feet wet in the non-profit world. In the early stages of a non-profit, an organization is not recognized by the IRS as tax-exempt. However, you still need to raise money during the beginning stages.
A fiscal sponsor is defined as “a non-profit organization that provides fiduciary services, funds management, and administrative support to help support charitable projects. This could be an artist raising money to complete a local downtown mural, or allow a manufacturer to create and allocate products to countries suffering from a disease like malaria.
The fiscal sponsor will take on the role of receiving any charitable contributions on behalf of the organization they have chosen to sponsor. They also benefit organizations that aren’t tax-exempt by providing a channel type service. Donors can claim a tax deduction, as the fiscal sponsor is tax-exempt and recognized by the IRS.
This also allows new non-profits to test the waters with their new ideas. They’re able to see if the general public is interested in funding their ideas and that they will succeed.
Secure Funding For Your Non-Profit
When exploring funding options for your non-profit organization, there are several avenues you can take. You’ll have to consider which type of funding will work best for you and your community.
These various avenues of funding are helping non-profits around the world assist those around them who need it the most. We can expect that these types of investments will continue to help communities today, tomorrow, and many years to come.