Mission-Related Investments (MRIs)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on May 26, 2023

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What Are Mission-Related Investments?

Mission-related investments are investments made by organizations with the primary goal of generating both a financial return and a positive social or environmental impact.

These investments align an organization's investment strategy with their mission and values, and can support initiatives that are consistent with their goals.

Examples of mission-related investments include loans and microfinance, bonds, equity financing, and investments in real assets such as green infrastructure, affordable housing, and sustainable agriculture.

Key Players in Mission-Related Investments

Foundations and Philanthropic Organizations

Foundations and philanthropic organizations play a crucial role in MRIs, using their financial resources to support mission-aligned projects and companies. These organizations often leverage their investments to catalyze change and drive impact in their areas of focus.

Nonprofit Organizations

Nonprofit organizations, including NGOs and charitable organizations, are increasingly adopting MRIs as a way to generate additional funding for their programs and initiatives.

By investing in projects that align with their mission, nonprofits can diversify their revenue streams and increase their financial sustainability.

Social Enterprises and Businesses

Social enterprises and mission-driven businesses can benefit from MRIs by attracting investments that help them scale their impact and achieve their mission. In turn, they contribute to the growth and success of the impact investing ecosystem.

Impact Investment Funds and Advisors

Impact investment funds and advisors play a pivotal role in connecting organizations with mission-related investment opportunities. These professionals provide guidance, expertise, and resources to help organizations develop and implement effective MRI strategies.

Key Players in Mission-Related Investments

Types of Mission-Related Investments

Debt Financing

Loans and Microfinance

Organizations can provide loans and microfinance to mission-aligned businesses and projects, supporting their growth and impact. These investments can range from small loans to individuals and communities to larger loans for infrastructure projects.

Bonds

Mission-related bonds are debt instruments issued by companies, governments, or organizations to finance projects with a social or environmental impact. By investing in these bonds, organizations can support initiatives that align with their mission while generating financial returns.

Guarantees

Guarantees are financial instruments that provide credit enhancement for mission-aligned projects, helping to reduce risk and attract additional investors. By offering guarantees, organizations can support projects that might not have access to traditional financing.

Equity Financing

Private Equity

Private equity investments involve acquiring ownership stakes in private companies that have a social or environmental impact. Through these investments, organizations can support mission-aligned businesses while potentially realizing significant financial returns.

Venture Capital

Venture capital investments focus on early-stage companies with high growth potential and a clear mission-related impact. By investing in these startups, organizations can foster innovation and drive change in industries and sectors that align with their mission.

Public Equity

Public equity investments consist of buying shares in publicly traded companies that have a strong social or environmental focus. These investments allow organizations to support mission-aligned businesses while benefiting from potential stock market gains.

Real Assets

Green Infrastructure and Renewable Energy

Investing in green infrastructure and renewable energy projects can help organizations support the transition to a low-carbon economy while generating financial returns. Examples include solar, wind, and hydroelectric power projects, as well as energy-efficient buildings and transportation systems.

Affordable Housing and Community Development

Organizations can invest in affordable housing and community development projects to support low-income communities and foster social inclusion. These investments may include the development or renovation of housing, community centers, schools, and healthcare facilities.

Sustainable Agriculture and Forestry

Investments in sustainable agriculture and forestry can help organizations contribute to food security, biodiversity conservation, and climate change mitigation. Examples include organic farming, agroforestry, and responsible forestry management practices.

Types of Mission-Related Investments

Mission-Related Investment Process and Strategy

Defining Investment Goals and Risk Tolerance

Organizations must begin by defining their investment goals and risk tolerance to develop an effective MRI strategy. This process involves determining the desired balance between financial returns and social or environmental impact, as well as assessing the organization's capacity for risk.

Identifying Potential Investments Aligned With the Mission

Once investment goals and risk tolerance have been established, organizations must identify potential investments that align with their mission.

This may involve researching industries, sectors, and specific projects or companies that demonstrate a strong commitment to social and environmental responsibility.

Due Diligence and Impact Assessment

Organizations must conduct thorough due diligence and impact assessment to evaluate the financial viability and potential social or environmental impact of their investments. This process may include financial analysis, impact measurement, and engagement with stakeholders.

Portfolio Construction and Diversification

To minimize risk and optimize returns, organizations should construct a diversified investment portfolio that includes a mix of different asset classes, industries, and geographies.

This approach helps ensure that the overall performance of the portfolio remains resilient in various market conditions.

Ongoing Monitoring and Evaluation

Organizations must regularly monitor and evaluate their mission-related investments to ensure they continue to align with their mission and generate the desired impact.

This process may involve tracking financial performance, assessing impact outcomes, and engaging with investees to address challenges and identify opportunities for growth.

Mission-Related Investment Process and Strategy

Advantages of Mission-Related Investments

Alignment of Investment Portfolio With Organizational Mission

One of the main benefits of MRIs is their ability to align an organization's investment portfolio with its mission.

By investing in companies and projects that share the same values and objectives, organizations can promote their mission and make a tangible impact on social and environmental issues.

Potential for Positive Social and Environmental Impact

MRIs offer organizations the opportunity to create lasting, positive change by addressing social and environmental problems.

By investing in projects that tackle these issues, organizations can contribute to sustainable development and improve the quality of life for communities around the world.

Long-Term Value Creation and Sustainable Growth

Mission-related investments focus on long-term value creation, leading to sustainable growth. By investing in companies and projects that prioritize social and environmental impact, organizations can ensure that their financial returns are generated in a responsible and sustainable manner.

Enhanced Stakeholder Relationships and Reputation

MRIs can enhance an organization's reputation and strengthen relationships with stakeholders, including donors, employees, customers, and community members.

By demonstrating a commitment to social and environmental responsibility, organizations can build trust and credibility among their stakeholders.

Challenges and Risks in Mission-Related Investments

Balancing Financial Returns and Impact Goals

One of the main challenges in mission-related investing is finding the right balance between financial returns and social or environmental impact.

Organizations must carefully weigh their investment decisions to ensure they can achieve their mission objectives without compromising financial sustainability.

Lack of Standardized Impact Measurement and Reporting

There is currently no universally accepted standard for measuring and reporting the impact of mission-related investments. This lack of standardization can make it difficult for organizations to compare investment opportunities and assess their overall impact.

Limited Availability of Investment Opportunities

The availability of mission-aligned investment opportunities can be limited, particularly for smaller or niche organizations. This may make it challenging for organizations to find suitable investments that align with their mission and meet their risk and return requirements.

Regulatory and Legal Considerations

Organizations must navigate a complex web of regulatory and legal considerations when engaging in mission-related investing. This may include compliance with fiduciary duties, tax implications, and adherence to investment restrictions.

Benefits and Drawbacks of Mission-Related Investments

Conclusion

Mission-related investments have the potential to drive positive change and create lasting impact in the social and environmental spheres.

As the field continues to evolve, organizations must navigate the challenges and risks associated with MRIs while capitalizing on emerging trends and opportunities.

By embracing mission-related investing, organizations can advance their mission objectives, contribute to sustainable growth, and foster a more equitable and just world.

Mission-Related Investments (MRIs) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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