What’s more fun than perusing a glossary of key terms?  Here’s hoping some of this may help improve translatability and the use of jargon in impact finance.

**Adapted from the European Venture Philanthropy Association 2018 “Impact Strategies: How Investors Drive Social Impact” report).


The people, communities, broader society and environment that a social enterprise seeks to reach through its activities. Beneficiaries can be affected positively or negatively by the activities of the enterprise. Beneficiaries can be divided into direct and indirect or primary and secondary, depending on their relationship with the benefits.

Business model

A business model describes the rationale of how an organisation creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of constructing a business model is part of the business strategy. In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, business process, target customers, offerings, strategies, infrastructure, organisational structures, sourcing, trading practices, and operational processes and policies including culture.


The obligation of an organisation to account for or take responsibility for the effect of its activities.


The concrete actions, tasks and work carried out by the organisation to create its outputs and outcomes and achieve its objectives.


Attribution takes account of how much of the change that has been observed is the result of the organisation’s activities, and how much is the result of actions taken simultaneously by others (e.g. other social enterprises, government).

Business plan

Document which describes an organisation’s goals and the operating model and financial resources which will be used in order to reach them.

Capacity building (also known as organisational support)

Approach aimed at strengthening organisations supported to increase their overall performance by developing skills or improving structures and processes.

Co-investment (also known as Co-funding)

In private equity, co-investment is the syndication of a financing round or investment by other funders alongside a private equity fund. In venture philanthropy, it involves the syndication of an investment into a social purpose organisation (SPO), by other funders (e.g. grant-makers or individuals) alongside a social/impact investor.

Convertible loans and convertible debts

A convertible loan is a short-term debt that converts into equity. Usually it converts at the next investment round.  The borrower gives the lender rights to exchange its creditor position for an ownership in said enterprise at a later date.  In the case of ‘convertible debt’, a loan is converted to equity either because the borrower’s regulator requires the intermediary to bolster its capital or upon the occurrence of a future financing.   Typically helpful for earlier stage, harder-to-value companies.

Corporate Social Investor (CSI)

A Corporate Social Investor (CSI) is any vehicle formally related to a company that aims to create social impact – i.e. impact-first or impact-only organisations linked to companies. Examples are corporate foundations, social businesses, social impact funds, and accelerators.

 Debt instruments

Debt instruments are loans that the social/impact investor can provide to a social enterprise, charging interest at a certain rate. The interest charged can vary depending on the risk profile of the investee and on the securitisation and repayment priority of the loan (senior vs subordinated loan).


Displacement occurs when the positive outcomes experienced by beneficiaries accessing the organisation’s services also create negative outcomes experienced by another group elsewhere (also as a result of the organisation’s activities).


Drop-off occurs when, over time, the effects of the output and the observed outcomes decreases (e.g. beneficiaries’ relapse, loss of job attained, reversion to previous behaviours).

Due diligence

Due Diligence is the process whereby an organisation or company’s strengths and weaknesses are assessed in detail by a potential investor with a view to investment.  Due diligence is often a necessary step towards achieving comfort for a prospective funder before they act.

Equity instruments

Equity instruments are contracts through which a social/impact investor provides funding to social enterprises and in return acquires ownership rights on part of the enterprise’s business. This can be appropriate when the prospect of a loan repayment is low or non-existent. If the business is successful, the equity share holds the possibility of a financial return in the form of dividend payments. In addition, it allows for the possibility of a transfer of ownership to other funders in the future.


The end of the relationship between the a social investor and the social enterprise.   The nature of the exit will normally be agreed before the investment is completed. In the case of a charity, the social/impact investor will ideally be replaced by a mix of other funders (see financial sustainability). The time scale for the exit can be agreed upon at the outset. In the case of a social enterprise, exit may require the repayment of a loan, for example, and the timing will depend on the commercial success of the enterprise. An exit strategy is the action plan to determine when the social/impact investor can no longer add value to the investee, and to end the relationship in such a way that the social impact is either maintained or amplified, or that the potential loss of social impact is minimised.

Financial Instruments (FIs)

Financial instruments are contracts involving monetary transfers through which, in the VP/SI space, venture philanthropy organisations and social investors financially support social purpose organisations.

Financial sustainability

Financial sustainability for a social enterprise is the degree to which it collects sufficient revenues from the sale of its services to cover the full costs of its activities. For charities, it involves achieving adequate and reliable financial resources, normally through a mix of income types.


Public- benefit foundations are asset-based and purpose- driven. They have no members or shareholders and are separately constituted non-profit bodies. Foundations focus on areas ranging from the environment, social services, health and education, to science, research, arts and culture. They have an established and reliable income source, which allows them to plan and carry out work over a longer term than many other institutions such as governments and companies. In the context of VP, foundations are non-profit organisations that support charitable activities either through grant making or by operating programmes. (Source: European Foundation Centre http://www.efc.be)


A fund is a vehicle created to enable pooled investment by a number of investors and which is usually managed by a dedicated organisation.


Grant-makers include institutions, public charities, private foundations, and giving circles, which award monetary aid or subsidies to organisations or individuals. Generally known as foundations in Continental Europe, grant-makers also include certain types of trusts in the United Kingdom.


Grants are a type of funding in the form of a cash allocation that establishes neither rights to repayments nor any other financial returns or any form of ownership rights on the donor.


A guarantee is a promise by one party (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the debt. In the VP context, guarantees are one of the financial instruments available for social/impact investors to support social enterprises. The social/impact investor in this case does not need to supply cash up-front, but it opens up access to bank funding by taking on some or all of the risk that the lender would otherwise incur. (Source: https://en.wikipedia.org/wiki/Loan_guarantee)

Hybrid structure/nature

The hybrid structure of the social enterprise is a combination of a for-profit entity and a not-for-profit entity. The hybrid structure is an innovative way to address the issue of access to finance.  By setting up a hybrid structure, the enterprise can attract grants through the non-profit entity and social investment through the for-profit entity, hence increasing the pool of resources available while channelling them in the most effective way. (Source: Gianoncelli, A. and Boiardi, P., 2017)

Impact Investing (II)

Impact investing is a form of investment that aims at generating social impact as well as financial return.

Impact Management

The use of the information collected through impact measurement to make informed decisions to increase positive outcomes and reduce negative ones.

Impact Measurement (IM)

Measuring and monitoring the amount of change created by an organisation’s activities.

Impact Strategy

An Impact Strategy represents the way in which a capital provider codifies its own activities along three axes: social impact targeted, financial return sought and social/financial risk appetite. Two main impact strategies have been identified in the ecosystem: investing for impact and investing with impact.

Impact Value Chain

Represents how an organisation achieves its impact by linking the organisation to its activities and the activities to outputs, outcomes and impacts.

Impact Washing

Impact washing refers to the process of labelling as “impact investments” or, more in general, as investments aiming to achieve a social impact, investments that do not really provide a positive change for their final beneficiaries.  Impact washing occurs when traditional investments with a market-like risk-return profile are labelled as impact investments for marketing reasons, and often to benefit from some sort of subsidy mechanism. Identifying impact washing is difficult, as no categorisation of “real” impact investments exists.

In-house resources

Resources provided within the social/impact investor itself, through its staff members or volunteers, as opposed to people within the greater network of the VPO/ SIs, service providers, or portfolio organisations.


Indicators are specific and measurable actions or conditions that assess progress towards or away from outputs or outcomes. Indicators may relate to direct quantities (e.g. number of hours of training provided) or to qualitative aspects (e.g. levels of beneficiary confidence).

Institutional Investor

An entity that invests larger sums of money on behalf of others. Institutional investors typically seek commercial returns. Commercial banks and pension funds are examples of institutional investors.


The social purpose organisation or enterprise that is the target of the social/impact investor activity and the recipient of financial and non-financial support.


An investment is the use of money with the expectation of making favourable future returns. Returns could be financial, social, and/or environmental.

Investment proposal

The investment proposal is the document prepared by the VPO/ SI to present a potential investment (including nature, goals and funding) to the investment committee.

Key performance indicators (KPIs)

Key Performance Indicators are a business metric used to evaluate the extent to which the organisation has achieved a goal and factors that are crucial to the success of an organisation. KPIs differ per organisation, business KPIs may be net revenue or a customer loyalty metric, while government might consider unemployment rates.

Long-term investment

A long-term investment is made over a period of five years or more.

Management System:

Provides tools for organizations to manage detailed operational information about drivers of impact.


Monetisation is the process of transforming the value of outcomes and/or impacts into a unit of currency. SROI is a framework that guides how to monetise the value of social impact in financial terms.

Non-Financial Support (NFS)

The support services some impact investors offer to their investees to increase their societal impact, organisational resilience and financial sustainability, i.e. the three core areas of development of the social enterprise.

Organisational resilience

The assessment of the degree of maturity of a social enterprise, in terms of the degree of development of the management team and organisation (governance, fund raising capacity etc.).

Organisational support (also known as capacity building) Approach aimed at strengthening organisations supported to increase their overall performance by developing skills or improving structures and processes.


The changes, benefits (or dis-benefits), learnings, or other effects (both long and short term) that result from the organisation’s activities. Outcomes can be short or long term, negative or positive.


The quantified summary of activities (e.g. tangible products and services) that result from the organisation’s activities. These are typically seen as short-term stocks or units of measurement that are more immediately discernible as the result of a particular activity.


A portfolio is a collection of projects and/or organisations that have received sponsorship from the investor. A distinction is often made between ‘active’ and ‘past’ portfolio, distinguish between the organisations with which the investor is actively involved. Usually, however, all portfolio organisations are included in the greater network of the investor.

Portfolio manager (also known as Investment manager) A portfolio manager is given the responsibility of tracking the performance of and maintaining communications with the various organisations and/or projects within the investor’s portfolio.

Pre-investment stage

The pre-investment stage is the process during which the investor examines the operations and leadership of the project or organisation with a view towards making an investment. This might include a detailed review of the financials, operations, or reference checks for organisational leaders. The term due diligence is also used, which has a legal definition as a measure of prudence. In other words, the investor is assessing if it is likely to get what it thinks it is paying for.

Private equity

Ownership in a firm which is not publicly traded and which usually involves a hands-on approach and a long-term commitment for the investors.

Pro-bono contribution

Professional work undertaken voluntarily and without payment. Unlike traditional/unskilled volunteerism, itis service that uses the specific skills of professionals to provide services to those who are unable to afford them.

Rating System:

In terms of a fixed set of indicators, the impact investment’s quality, or potential quality, is summarized by a score or symbol.

Recoverable grants

Recoverable grants are grants that can be returned to the social/impact investor, under certain terms and conditions agreed in advance by the social/impact investor and the social enterprise.  Recoverable grants are “designed to focus the recipient on sustainability and reduced risk of grant dependence”. (Source: Varga, E., and Hayday, M., 2016)

Return on Investment (ROI) (see also Social Return on Investment – SROI)

Return on Investment is the profit or loss resulting from an investment. This is usually expressed as an annual percentage return.

Scaling up

Processes of developing and growing the activities of a social enterprise to expand its social reach and increase its social impact.

Seed financing

Seed financing is money used for the initial investment in a start-up company, project, proof-of-concept, or initial product development.

Short-term investment

A short-term investment is made over a one-year period less, or an investment that matures in one year or less.

Social enterprise

A social enterprise is an agent in the social economy whose main objective is to have a social impact in addition to (but not necessarily instead of) making a profit for their owners or shareholders.  It operates by providing appropriate goods and services for the market in an entrepreneurial manner and uses its profits primarily to achieve social outputs and  outcomes.  It is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders affected by its commercial activities. The European Commission uses the term social enterprise’ to cover the following types of business:

  • Those for who the social or societal objective of the common good is the reason for the commercial activity, often in the form of a high level of social innovation.
  • Those where profits are mainly reinvested with a view to achieving this social objective.
  • Those where the method of organisation or ownership system reflects the enterprise’s mission, using democratic or participatory principles or focusing on social justice. There is no single legal form for social enterprises.
  • Many operate in the form of social cooperatives, some are registered as private companies limited by guarantee, some are mutual, and a lot of them are no-profit-distributing organisations like provident societies, associations, voluntary organisations, charities or foundations. (Source: European Commission http://ec.europa.eu/growth/sectors/social-economy/enterprises_it)

Social impact

The attribution of an organisation’s activities to broader and longer-term outcomes. To accurately (in academic terms) calculate social impact you need to adjust outcomes for: (i) what would have happened anyway (‘deadweight’); (ii) the action of others (‘attribution’); (iii) how far the outcome of the initial intervention is likely to be reduced overtime (‘drop off’); (iv) the extent to which the original situation was displaced elsewhere or outcomes displaced other potential positive outcomes (‘displacement’); and for unintended consequences

(which could be negative or positive).

Social Innovation

Social innovations are new ideas that meet social needs, create social relationships and form new collaborations. These innovations can be products, services or models addressing unmet needs more effectively. The European Commission’s objective is to encourage market uptake of innovative solutions and stimulate employment. (Source: European Commission http://ec.europa.eu/growth/industry/innovation/policy/social_it)

Social Investment (SI) (also known as Social Finance)

Social investment is the provision and use of capital to generate social as well as financial returns. The social investment approach has many overlaps with the key characteristics of venture philanthropy, however social investment means investment mainly to generate social impact, but with the expectation of some financial return (or preservation of capital).

Social investment intermediaries

Organisations that aim at increasing the pool of financial resources available for social enterprises to reach and scale their social impact by bridging the demand and the supply side of capital, channelling funds towards these enterprises in a more efficient way and bringing more resources into the VP/SI space.

Social Purpose Organisation (SPO)

An organisation that operates with the primary aim of achieving measurable social and environmental impact. Social purpose organisations include charities, non-profit organisations and social enterprises.

Social Value

Is the relative importance of changes experienced (or likely to be experienced) by stakeholders as a result of activities.

Socially Responsible Investing (SRI)

Also known as sustainable, socially conscious, “green” or ethical investing, this term defines any investment strategy seeking both financial return and social good. In its broadest usage, SRI refers to proactive practices such as impact investing, shareholder advocacy and community investing.  Socially responsible investments encourage corporate practices that promote environ- mental stewardship, consumer protection, human rights and diversity. They can also represent the avoidance of investing in industries or products that can be socially harmful, including alcohol, tobacco, gambling, pornography, weapons and/ or the military. The term dates back to the Quakers, who in 1758, prohibited members from participating in the slave trade.

Social Return on Investment (SROI)

SROI is a framework of principles that allows us to account for social value/ impacts. It places the involvement of stakeholders as central to understanding the consequences of activities and the value of experiences so that we can better understand, report and manage impacts to improve performance.

Social sector

Social sector is an alternative term used in reference to the non-profit sector, non-governmental sector, voluntary sector, independent sector, or third sector.


Any party that is affecting or affected by the activities of an organisation. Typically, the most prominent stakeholders are direct or target beneficiaries, though stakeholders as a group also includes an organisation’s staff and volunteers, its service-users and investees, its suppliers and purchasers and most likely the families and communities of beneficiaries and those close to them.

Syndication (See Co-investment)

 Tailored financing (TF)

The process through which a venture philanthropy organisation or a social investor (social/impact investor) finds the most suitable financial instrument(s) to November 2018 81 support a social enterprise, choosing from the range of financial instruments available (grant, debt, equity, and hybrid financial instruments). The choice of the financial instrument(s) will depend on the risk/ return/impact profile of the PO/SI and on the needs and characteristics of the business.

Theory of Change (ToC)

A theory of change defines all building blocks required to bring about a given long-term goal. This set of connected building blocks is depicted on a map known as a pathway of change or change framework, which is a graphic representation of the change process.

Venture Philanthropy (VP)

VP is a high-engagement and long-term approach to generating social impact through three practices: tailored financing, organisational support, impact measurement and management (IMM)

Venture Philanthropy Organisation/Social investor (VP/SI organisation)

An organisation pursuing a venture philanthropy/social investment approach.


A person who voluntarily offers himself or herself to performs a service willingly and without pay. For the purpose of this report, differently from pro-bono and low-bono supporters, volunteers offer unskilled labour.